Reinsurance growth in 2024 was supported by increased collaboration between re/insurers and alternative investment managers, along with higher utilization of offshore reinsurance structures and continued annuity sales expansion, according to a new report from Fitch Ratings.
The report noted that total reserves ceded, including reserve credit and modified coinsurance (modco) reserves as disclosed in Schedule S Part 3 Section 1 of US statutory financial statements, reached $2.4 trillion in 2024. This marks an increase from $2.0 trillion in 2023.
Fitch highlighted the growing role of alternative asset managers in the reinsurance sector, often through sidecars and affiliated offshore platforms. These structures, typically controlled or backed by investment managers, are being used to support insurers in transferring capital-intensive legacy blocks of business, particularly in the life segment.
The expansion of offshore reinsurance platforms offers carriers flexibility in managing capital requirements and supporting new business production while reducing exposure to long-duration liabilities. Fitch expects this trend to continue in the near term, as insurers seek to improve balance sheet efficiency and reduce required capital under risk-based frameworks.
Offshore reinsurance has reached significant scale among US life insurers, with more than $1 trillion in liabilities ceded to offshore entities by the end of 2024. These transactions are heavily concentrated in jurisdictions such as Bermuda, the Cayman Islands, and Barbados, where regulatory frameworks permit more flexible capital structures.
Within that offshore growth, Bermuda has taken a leading role, accounting for more than 40% of total ceded reserves and over 60% of newly originated offshore reinsurance cessions. The territory continues to be a hub for reinsurance formations due to its regulatory environment and capital efficiency.
The report also pointed to the fourth consecutive year of record annuity sales as a contributing factor to the growth of reinsurance activity. Insurers are increasingly using reinsurance arrangements to manage the liability profile of new annuity business and to free up surplus capital.
While these trends are facilitating industry growth, Fitch cautioned that the increased volume and complexity of offshore transactions and modco structures could lead to elevated counterparty credit risk. Large-scale deals may also prompt scrutiny around risk transfer effectiveness and regulatory oversight.
Despite the growth in offshore reinsurance activity, regulatory agencies have raised concerns about reduced transparency, potential mismatches in asset backing, and counterparty risk exposure.
The use of offshore reinsurers – often subject to less stringent capital requirements than US domiciled firms – has led to increased scrutiny over whether such arrangements offer robust protection in times of stress.
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