The asset intensive life reinsurance (AILR) market in the US got its start in the aftermath of the Global Financial Crisis; the reduction in interest rates and regulatory changes made fixed deferred annuity books less palatable to hold on life insurance company balance sheets, with reinsurers offering a more fitting home for these liabilities.
But in the past almost 20 years, the global AILR market has now grown to an all-time high of approximately $160bn in 2025, according to new data published by broker, Guy Carpenter.
The aggregate value has risen in each of the last four years, a recovery since a steep drop-off from 2021 to 2022. But what’s more notable about the data is that third-party capital – essentially, alternative asset manager-owned reinsurers – now accounts for approximately one-third of the total, more than double the levels from 2022.
US capital markets investors in particular are keen to tap into the ‘permanent capital’ that the life and annuity market provides, and these structures are enabling them to direct this capital into private assets they originate themselves or access via partnerships with other asset management firms.
But they, and the traditional reinsurers, are working in a different environment now than the one that began around 2008-09.
“There are a couple of components that are new-ish in the market. First is the tremendous volume of new capital coming into a market where there are finite liabilities to reinsure. That creates a demand and supply conundrum that influences pricing dynamics,” said Richard de Haan, Global Risk Modelling Services Leader at PwC in New York.
“Also, in the last three to four years, we’ve started to see more complex liabilities being traded in the US marketplace – products such as universal life with secondary guarantees where you have more policyholder behaviour risk, variable annuity transactions which bring market risk and demographic risk and long-term care related transactions which involve longevity risk. The complexity of the underlying liabilities has changed significantly. More complex liabilities require greater due diligence and understanding of the risks associated with that,” he added.
One would assume that this added complexity would be something of a speed bump on the road to growth but that doesn’t seem to be the case here. And neither is the new actuarial guideline AG 55, which has been designed to provide regulators with more transparency into the asset adequacy of offshore AILR structures, which in turn forces a fundamental shift in how cedants report risk.
One of the features of AG 55 is the new attribution analysis, a mandatory disclosure designed to bridge the gap between US statutory reserves and offshore levels. It provides a step-by-step breakdown of reserve decreases that attributes changes to specific factors like discount rates, mortality assumptions, and policyholder behaviour to ensure transparency in cross-border capital relief.
The initial filing deadline was at the beginning of April, and whilst it might be too early to tell what kind of impact this new requirement might have on the US market generally, activity in the space hasn’t been notably affected yet.
“This first round of AG55 is really information gathering. As counterparties provide information, like anything, the regulators look and assess – “Is there something we weren’t aware of and do we have to do something?” It’s hard to tell right now exactly what will change, but it hasn’t dampened any transactions to date and clients we speak to view it as good governance, something that is just the normal course of business,” said De Haan.
In the UK pension risk transfer market, there has emerged something of a systematising of transactions in the smaller end of the market. Both life insurers and brokers now have something of an ‘off-the-shelf’ solution that is helping get more deals over the line.
That’s not something that is likely to happen in the AILR space, however. The transactions are not only complex, but the market doesn’t really have a ‘smaller end’ in the same way that the PRT space does.
Add to that the fact that regulators are already involved in many stages of the transaction, and it becomes clear that the 9–12-month timeframe that this market frequently sees is not changing any time soon.
“There are just so many different permutations of these structures – they’re influenced by the underlying block of business, the jurisdiction and the relationship between different counterparties. It’s not one cedant to one reinsurer – often, three or four counterparties are involved. And then you have to seek approval from various regulators – the reality is that getting approvals from the board and management, and the regulators, particularly if they involve offshore structures, takes time,” said De Haan.
In a market that is complicated, where transactions take time, and where participants need to be large enough to absorb, then, what is the potential for growth to be as strong as it has been in recent years? After all, most of the large alternative investment firms in the US already participate in some way, shape or form and there is a finite amount of business that can be ceded.
That doesn’t mean that others might not have their eyes on trying to take a slice of the pie. But for any potential new entrants who might see a rising tide, there are two hurdles that are likely to be difficult to overcome for their boat.
“Sometimes it does seem like everyone wants to find a permanent capital source. But one of the biggest challenges for folks in the marketplace is finding skilled people who understand the insurance market and the ecosystem, and the nuances of structured vehicles involved in insurance,” said De Haan.
“Regulations, proper risk management, accounting, etc all cost money. If you don’t have scale, it’s very hard to be in this business and generate a decent enough return to stay in it. We’re already starting to see activity around consolidation in the US where M&A is being driven by the need to compete and the recognition that scale has to be at the heart of the strategy. And protecting the policy holder is the primary governance gate – a cedant is not going to choose the counterparty that simply gives the best price because the risk ultimately still sits with the cedant. New entrants would need other levers than just price to compete. That’s difficult.”
