Continued growth in U.S. reinsurance in 2024 was driven by strategic collaborations between re/insurers and alternative investment managers, increased utilization of offshore platforms, and a fourth consecutive year of record-breaking annuity sales.
Fitch Ratings anticipates that offshore reinsurance will remain prevalent in the near to intermediate term, as insurers continue to utilize reinsurance to drive growth and enhance capital efficiency. In 2024, U.S. life insurers’ ceded reserves—reflected by reserve credits and modified coinsurance reserves—rose to $2.4 trillion, up from $2.0 trillion in 2023.
Strategic Partnerships
Strategic alliances between re/insurers and alternative investment managers (Alt IM) have driven growth in asset-intensive reinsurance, primarily in more economically favorable regulatory environments outside the U.S.
Fitch estimates that approximately 40% of ceded reserves were transferred to insurers or reinsurers engaged in some form of alternative investment manager (Alt IM) partnership. These Alt IM collaborations have persisted into 2025, with several new partnerships recently announced involving both publicly traded companies and mutual insurers.
Offshore Platforms
Offshore reinsurance has seen significant growth in the North American life insurance sector, primarily fueled by the more cost-effective and less stringent regulatory environments.
The majority of offshore reinsurance reserves are ceded to Bermuda, which introduced several regulatory enhancements in 2024, strengthening capital requirements, oversight, and operational detail for businesses on the island. Fitch views these heightened capital standards and regulatory rigor positively, reinforcing Bermuda’s Solvency II equivalence and its status as a reciprocal jurisdiction with the NAIC.
Life insurers have increasingly engaged in structuring sidecars and establishing offshore reinsurance platforms, frequently collaborating with alternative investment managers (Alt IMs) to drive growth and optimize capital. These reinsurance platforms and sidecars offer supplementary capital to re/insurers, enabling expansion through both inorganic reinsurance transactions and organic retail annuity sales.
Annuity Growth
Several factors have contributed to the growth in annuity sales in recent years, including a higher interest rate environment, an aging population, and increased capital from alternative investment managers. According to LIMRA’s Fact Tank, annuity sales reached $434 billion in 2024, marking a fourth consecutive record year for retail sales. However, Fitch anticipates sales to remain flat or decline in 2025, citing the unsustainability of recent growth rates amid ongoing macroeconomic volatility. (Editor’s note: LIMRA is the life insurance trade association, based in Windsor, Connecticut).
Reserves Ceded Offshore Continues to Rise
Life reinsurance experienced significant year-over-year growth in 2024, fueled by insurers seeking to offload capital-intensive blocks of business, the rise in interest rates driving record annuity sales, and the expansion of offshore reinsurance entities and sidecar vehicles.
Although Fitch anticipates a slowdown in sales in 2025, substantial volumes of offshore reinsurance are expected to continue, driven by the more economically favorable reserve regimes outside the U.S.
Reserves ceded by U.S. entities have nearly doubled since 2020, rising from $1.3 trillion to $2.4 trillion in 2024. During the same period, reserves ceded to offshore jurisdictions surged 147%, exceeding $1.1 trillion.
The primary driver of this increase was reserves ceded to Bermuda, which represented 84% of all offshore ceded reserves. Including Barbados and the Cayman Islands, these three jurisdictions collectively account for nearly 95% of offshore ceded reserves. While Bermuda’s regulatory framework is regarded as robust, Fitch approaches other offshore jurisdictions with caution, conducting case-by-case analyses that consider factors such as jurisdictional standards, reserving requirements, counterparty risk, and structural safeguards.
Offshore Reinsurance Platform Growth Persists
Fitch anticipates continued growth in insurer and alternative investment manager (Alt IM) partnerships in the near term, particularly via minority stakes, sidecars, and offshore reinsurance platforms. Insurers frequently establish sidecars to optimize capital, drive growth, and improve earnings, while attracting capital from third-party investors.
Sidecars assume the entirety of their business from the sponsoring insurer, while reinsurance platforms generally begin with cessions from their sponsor and are anticipated to gradually include third-party business. Both types of offshore reinsurance vehicles help optimize capital for the sponsoring insurer and boost fee income for both the insurer and the Alt IM partner.
The rise in offshore reinsurance platforms and sidecar vehicles—typically owned by alternative investment managers—has driven increased reinsurance activity as the life insurance industry offloads capital-intensive legacy liabilities. These offshore platforms offer insurers greater flexibility in managing capital requirements, new business volumes, and overall risk exposure.
However, transactions involving substantial reserve volumes may raise concerns about excessive growth and heightened counterparty credit risk.
Large Block Deals and Record Annuity Sales Fuel Reinsurance Growth
Fitch considers recent block reinsurance transactions to be largely neutral for ratings. While cedents often see an improved business risk profile offset by decreased diversification, reinsurers gain scale and may mitigate risk by re-underwriting key liability assumptions.
In recent periods, complex liabilities such as universal life with secondary guarantees, variable annuities, and long-term care insurance have continued to be ceded. Fitch expects this trend to persist, especially among publicly traded companies aiming to shed non-core liabilities that yield returns below their hurdle rates. This allows them to free up capital for distribution to shareholders and consolidators—including those supported by alternative investment managers—who seek to expand their scale and reposition investments into less-liquid strategies by leveraging asset origination expertise.
The share of reserves ceded to re/insurers affiliated with alternative investment managers (Alt IMs) has increased significantly over the past five years. In 2020, approximately 11%, or $0.3 trillion, of reserves were ceded to reinsurers connected to Alt IMs. By 2024, this figure surged to 40%, approaching $1.0 trillion. This upward trend is expected to continue into 2025 as Alt IM partnerships and offshore reinsurance platforms expand further.
Fitch anticipates offshore reinsurance will continue to grow in the near term, supported by record fixed annuity sales and the resulting capital pressures prompting insurers to optimize capital via flow reinsurance. Overall, reinsurance ceded has nearly doubled over the past five years, largely driven by offshore transactions.
According to LIMRA’s Fact Tank, annuity sales have set consecutive records over the past four years, rising from $255 billion in 2021 to $313 billion in 2022, $385 billion in 2023, and $434 billion in 2024. Fitch anticipates a modest decline in sales for 2025, though levels are expected to remain strong relative to historical averages. In Q1 2025, sales totaled $106 billion, slightly down from $107 billion in Q1 2024 but up from $102 billion in Q4 2024.
