US life insurers have transferred more than US$1 trillion in liabilities to offshore reinsurers, according to data from S&P, as the industry increasingly relies on foreign jurisdictions to manage long-term risks tied to retirement savings.
The moves continue despite heightened regulatory attention concerning the adequacy of asset backing and the broader implications for financial stability.
In 2023 alone, more than US$130 billion of liabilities were shifted to reinsurers based primarily in Bermuda by both private capital-owned groups, such as Apollo’s Athene and KKR’s Global Atlantic, and traditional insurers like Prudential and MassMutual.
S&P’s data, as per a report from the Financial Times, also shows that total offshore reserves ceded by US life and annuity providers reached US$1.1 trillion by the end of 2024, with other jurisdictions such as the Cayman Islands and Barbados also seeing activity.
Beyond its offshore offshoot, reinsurance capital in Bermuda, one of the world’s leading hubs in the segment, now represents approximately 35% of the world’s reinsurance capacity, highlighting the jurisdictions’ importance.
These reinsurance transactions occur amid increasing regulatory and credit rating agency concerns about the ability of offshore entities to meet obligations to policyholders. The issue gained attention following the collapse of 777 Re, a Bermudian reinsurer backed by private equity that had ties to investment vehicles connected to Miami-based entrepreneur Josh Wander.
After a failed attempt to acquire Everton Football Club, Wander's business collapsed, triggering financial fallout for insurers that had ceded assets to 777 Re. In March, Utah’s insurance commissioner sought court intervention to place one insurer and two affiliated reinsurers linked to 777 Re into rehabilitation.
The global reinsurance sector has long served as a tool for life insurers to manage longevity and other risks. However, the growing use of "asset-intensive" or "funded" reinsurance – which involves transferring both liabilities and the associated assets – has prompted greater regulatory oversight.
According to Fitch, the increasing integration between life insurers and alternative asset managers could lead to conflicts of interest, especially when financial incentives may not align with long-term policyholder protection.
By the end of 2024, Athene had transferred risk for US$193 billion in liabilities to offshore affiliates, according to a Fitch review of regulatory filings, a strategy that contributed to its record annuity sales.
In response to concerns arising from the 777 Re case, the Bermuda Monetary Authority said it would increase its scrutiny of connected-party assets. The US National Association of Insurance Commissioners has also implemented new supervisory measures, including additional investment portfolio reporting.
Concerns remain over standards in other jurisdictions. In particular, the Cayman Islands has drawn criticism over its capital requirements. Athene CEO James Belardi warned investors earlier this year about the "unabated growth" in the Cayman Islands, where he said US$150 billion in insurance reserves are backed by only a fraction of the capital required by US or Bermuda standards.
S&P’s data further shows that total reserves ceded by US life and annuity insurers — including both offshore and onshore transactions — rose to more than US$2.4 trillion by the end of 2024.
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