A new AM Best report notes an increased level of reinsurance leverage by US life/annuity (L/A) companies ceding out business, which is being fuelled by strong annuity product growth, higher interest rates, and further offshore transactions as a result of differing capital regimes.
The Best’s Market Segment Report, Global Life/Annuity Reinsurers Poised for Steady Growth, is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo.
Bermuda and, to a lesser extent, the Cayman Islands, have gained popularity among ceding companies amid increased demand for retirement solutions, as well as the need for reinsurance to serve as a capital and risk management tool. These factors have been underpinned by a stable economic environment and regulatory landscape, as well as political stability, access to legal and financial talent, and flexible accounting regimes.
“The treatment of required capital and reserves is often less stringent than for reinsurers domiciled onshore in the United States,” said Edward Kohlberg, Director, AM Best.
“There is increased recoverability risk in some cases due to a lack of collateralization in some jurisdictions.”
According to the report, the global L/A industry remains well-capitalised and positioned for robust growth due to increased dedicated capital for life reinsurance for traditional life business and more asset-intensive annuity business via third-party capital.
“Sidecars have also gained prominence in the L/A space,” said Lou Silvers, Senior Financial Analyst, AM Best.
“These are reinsurance affiliated or non-affiliated entities that draw on capital from third-party limited investors and can provide incremental just-in-time capital to execute larger deals when opportunity arises and earn additional fees for the general partner.”
Other report takeaways include that the amount of reserve credit taken and funds withheld on US cedents’ balance sheets has been steadily increasing as a percentage of gross reserve credits taken. At year-end 2025, 41% of the approximately $1.61trn in reserve credits taken belonged to reinsurers, up from about 21% at year-end 2016. AM Best notes pockets of concern that the level of excess capitalisation may be insufficient to support claims in stress scenarios.
Additionally, asset-intensive reinsurance, along with capital relief solutions, is supported by the rising private credit investment strategies within the market. Persistent and intensifying competition, especially from the private equity/asset manager entrants, has added to the rising pressure to grow returns.
Traditional reinsurers grew the total amount of in-force individual life business in 2025, as carriers value reinsurer services and biometric risk transfer solutions as ways to manage risks and capital.
