Best's Special Report: Bermuda Remains the Largest Offshore Life/Annuity Reinsurance Domicile
The newly issued Best's Special Report, titled 'Bermuda Remains the Largest Offshore Life/Annuity Reinsurance Domicile,' also notes that the island nation accounted for over 60% of reserves ceded for L/A transactions effective in 2023 and 2024. However, the growth in ceded reserves from U.S. L/A insurers slowed to 6.4% in 2024, compared with over 10% growth in each of the previous three years.
'Bermuda has a long history of reinsurance regulator accessibility, along with solid networks of legal, actuarial and accounting expertise,' said Jason Hopper, associate director, AM Best. 'Capital efficiency tends to be cited as the primary business rationale for using offshore reinsurance.'
The report cites the aging U.S. population and higher interest rates as drivers in the strong annuity growth over the past two plus years. While the growth tapered off in 2024, it is expected to continue, and more companies may look to reinsurers to manage growth and capital levels. Affiliated offshore reinsurance can provide country- risk diversification and capital-efficiency, which supports balance sheet growth. Yet it can also provide accounting and tax benefits. 'However, cross-border reinsurance introduces operational complexity and opaqueness, which may complicate analysis,' said Jacob Conner, associate analyst, AM Best.
According to the report, nearly 70% of reserves ceded offshore go to affiliates. Companies with asset manager/private equity sponsors comprise 46% of reserves ceded to offshore affiliates.
The report also includes data on U.S. life/annuity insurers, detailing the highest share of in-force ceded reserves offshore affiliates, a breakdown of in-force reserves assumed by region and a ranking of the largest reinsurance transactions for ceded reserves in 2024.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=355045.
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