Bermuda continues to maintain its role as a driving force in offshore reinsurance, accounting for more than 40% of total ceded reserves for US life-annuity writers in 2024, according to a new AM Best report.
The report, 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 US 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 at AM Best.
“Capital efficiency tends to be cited as the primary business rationale for using offshore reinsurance.”
The report cites the aging US 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 at 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.
