US regulators have adopted a new actuarial guideline that tightens oversight of asset-intensive life reinsurance, a change that could alter how insurers structure and report Bermudian-based transactions.
Actuarial Guideline 55, approved in August by the National Association of Insurance Commissioners (NAIC), requires US cedants to demonstrate that liabilities transferred offshore remain fully backed by assets under “moderately adverse” conditions.
The measure places additional scrutiny on the reserves supporting some of the largest life and annuity reinsurance arrangements in the market.
For the first time, asset adequacy testing is being formally extended to reinsured blocks. Under AG 55, cedants must assess the entire obligation after reinsurance, identify and review the assets supporting that obligation, establish a defined “starting asset amount,” and then disclose the analysis in their year-end statutory filings.
Regulators have said the objective is to make reserve movements tied to offshore reinsurance “observable, traceable and explainable,” providing clearer visibility into how transactions affect balance sheets. The framework is expected to influence how companies design and document future deals, particularly where reserve relief has been a significant driver.
Poojan Shah, of Willis Towers Watson, said the guideline is meant to “bring greater transparency to how reinsurance affects reserve adequacy.” Shah noted that in some cases, reinsurance structures have significantly lowered US statutory reserves without equally clear evidence that the associated assets would perform as expected under stress scenarios.
Bermuda remains the largest hub for offshore life and annuity reinsurance, with Bermudian-based reinsurers holding more than US$900 billion in US liabilities and over 80% of offshore life and annuity reserves. That concentration has made the island central to discussions about how much risk US insurers are transferring and how those ceded liabilities are being funded over time.
Recent analysis from Morningstar DBRS indicates the scale of that shift, estimating that by the end of 2024 US life carriers had ceded 38% of their US$2.4 trillion in reserves to Bermuda-based reinsurers, while more than US$50 billion in new capital has entered Bermuda’s life reinsurance market since 2016.
The report notes that large alternative asset managers have been acquiring or partnering with life insurers and reinsurers and redirecting portfolios toward higher-yielding private markets, linking offshore reinsurance strategies more closely with asset management objectives.
Moody’s has reached a similar conclusion on the growing role of Bermuda, reporting that the island now accounts for 84% of all US life and annuity reserves ceded to non-US jurisdictions.
AG 55 introduces additional responsibilities for US cedants operating in this environment. Companies may now need more granular data on asset portfolios, modeling assumptions, liquidity profiles and projected cash flows supporting future claims.
Although Bermuda is recognized by the NAIC as a “reciprocal jurisdiction,” eliminating collateral requirements for US cessions, cedants must still prove that ceded liabilities remain well supported on an economic and statutory basis.
Market participants expect that to shape treaty negotiations, including provisions on data access, reporting frequency and the sharing of modeling and stress-testing work between insurers and their Bermudian reinsurers.
