Fueled by strong annuity growth on higher interest rates, U.S. life/annuity (L/A) insurers have doubled their ceded reserves to $1.74 trillion between 2016 and 2023, with an increasingly larger portion headed offshore, according to a new AM Best report.

The Best’s Market Segment Report, “Strong Annuity Growth Continues Shift to Bermuda Reinsurers,” is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Other reinsurance-related reports, including AM Best’s ranking of top global reinsurance groups and in-depth looks at the insurance-linked securities, Lloyd’s, life/annuity, health and regional reinsurance markets, are available at Best’s Research.

According to this report, nearly 47% of ceded L/A reserves were transferred offshore in 2023, after climbing steadily from the 26% level in 2016. AM Best believes this growth is likely to continue, as more companies may look to reinsurance to manage growth and capital levels. “With new company formations, partnerships, and private capital entering the market, the reinsurance market remains competitive and a larger share of business is being ceded to affiliates,” said Jason Hopper, associate director, AM Best.

The report notes that the vast majority of $103.2 billion in ceded reserves stemming from the 10 largest transactions of 2023 involved offshore transactions. Bermuda accounted for over a third of all in-force business, as well as 60% of new business, in 2023. Many private equity-owned insurers have started creating offshore reinsurance entities in recent years; approximately two-thirds of reserves ceded offshore go to affiliates. Companies with asset manager/private equity sponsors account for almost 44% of reserves ceded to offshore affiliates.

Bermuda and the Cayman Islands have gained in popularity due to their stable political and economic environments and regulatory landscapes, as well as access to talent (mainly legal and financial professionals). They also have flexible accounting regimes and can choose which system works best, whether that involves IFRS 17, GAAP, modified GAAP, or even a statutory approach.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=346291.

Lastly, AM Best will host its annual reinsurance market briefing at Rendez-Vous de Septembre on Sept. 8, 2024, at 10:15 a.m. (CEST) in Monte Carlo. For more information, please visit http://www3.ambest.com/rd/rd.aspx?rd=RVDS2024.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Jason Hopper Associate Director, Industry Research & Analytics +1 908 882 1896 jason.hopper@ambest.com

Edem Kuenyehia Director, Market Development & Communications +44 20 7397 0280 edem.kuenyehia@ambest.com

Christopher Sharkey Associate Director, Public Relations +1 908 882 2310 christopher.sharkey@ambest.com