Offshore reinsurance expands despite slower annuity growth

Seven heavy users were owned by private equity managers.

Offshore reinsurance accounted for more than 56% of ceded US annuity reserves, including modified coinsurance reserves, in 2025, as insurers increased their use of offshore reinsurance despite slower annuity growth.

AM Best said reinsurance leverage in the US life and annuity industry has risen steadily since 2019, driven largely by private equity and asset manager-owned insurers and publicly traded companies. 

Bermuda remains the leading offshore domicile, whilst the Cayman Islands gained market share in 2025, partly due to newly established sidecars.  

Offshore jurisdictions can reduce required reserves by allowing insurers to use discount rates based on portfolio yields and a wider range of assets to back reserves. 

However, AM  Best said cross-border reinsurance can add operational complexity and create risks around regulatory oversight and counterparties.  

In an AM Best survey, 38% of industry executives identified collateral monitoring as the most important risk associated with offshore reinsurance. 

Another 31% cited enterprise risk management programmes, whilst nearly 20% pointed to counterparty diversification. 

The share of ceded reserves transferred to offshore affiliates rose to more than 61% in 2025, from 40% in 2020 and earlier. Seven of the 10 insurers with more than 80% of ceded reserves going to offshore affiliates were owned by private equity or asset managers. 

Unaffiliated reinsurance deals also outpaced affiliated transactions in 2025 for the first time in three years. The 10 largest deals totalled more than $107b in ceded reserves, compared with $35b in 2024, and accounted for more than 70% of reserves ceded to unaffiliated reinsurers. Two-thirds of these reserves went to reinsurers not rated by AM Best. 

AM Best said insurers can manage the risks through collateral monitoring, counterparty diversification and contract provisions covering events such as rating downgrades and changes in ownership. 

The NAIC’s AG-55, effective from 31 December 2025, also brings asset-intensive reinsurance within the scope of asset adequacy testing.