US life and annuity insurers are turning to international reinsurance to manage capital and risk, with a Society of Actuaries report identifying the Cayman Islands as part of strategies for balance sheet management and access to global funding.
The report, International Reinsurance Landscape Overview for U.S. Life & Annuities, also links this trend to product structures, asset allocation, and transaction design, showing how insurers align reinsurance decisions with long-duration liabilities and investment strategies.
“This report provides independent confirmation that the Cayman Islands is a well-regulated international reinsurance jurisdiction, supported by a robust regulatory framework and a risk-based supervisory approach focused on policyholder protection and ongoing regulatory oversight by the Cayman Islands Monetary Authority (CIMA),” said Faramarz Romer (pictured), chairman of CIRCA. “The Cayman Islands is well positioned to provide the capacity and expertise needed to support the needs of global insurers and reinsurers.”
The Society of Actuaries states that international reinsurance is used by insurers seeking pricing competitiveness and alignment of reserving and capital frameworks with internal risk practices. US insurers are looking to international jurisdictions to improve competitive positioning, provide policyholder protection, and align operations with economic-based management approaches.
Products most frequently ceded to international reinsurers tend to share common features, including medium- to long-term duration, upfront premiums, and predictable cash flows. These include deferred annuities such as fixed indexed annuities, fixed annuities, and multi-year guaranteed annuities, along with structured settlements and pension risk transfer transactions.
These product characteristics allow insurers to pursue reserve and capital efficiency through reinsurance structures while maintaining alignment with liability profiles.
The report outlines three common approaches used by US insurers: third-party reinsurance, international affiliates, and sidecars. Third-party reinsurance allows insurers to transfer liabilities to external reinsurers, offering speed of execution and access to established risk management capabilities, though it introduces profit sharing and counterparty considerations.
International affiliates provide insurers with control over operations and the ability to retain earnings, while also enabling access to non-US regulatory environments. However, these arrangements involve setup costs, regulatory compliance requirements, and operational complexity.
Sidecars combine elements of both approaches by bringing in external capital while allowing insurers to structure transactions and manage portfolios. These vehicles can support balance sheet management and capital deployment but may require longer setup timelines and involve shared economics with investors.
Asset strategy plays a role in reinsurance decisions. The report notes that life insurers are diversifying portfolios into private credit, structured assets, private equity, real estate, and infrastructure investments. International reinsurers may provide expertise in sourcing and managing these assets.
Insurers can choose between internal and external asset management models or partner with private equity investors. External asset managers and private equity-backed reinsurers may offer access to broader investment opportunities, while internal management allows insurers to retain control over investment decisions.
The Cayman Islands operates under a risk-based capital system aligned with international standards, including the Insurance Core Principles. Reinsurers are required to maintain capital at or above the Prescribed Capital Requirement (PCR), with additional buffers often held based on rating agency expectations.
Cayman Islands reinsurers also provide full collateralization for US statutory reserves, with assets held in qualified US trusts in line with the Credit for Reinsurance Model Law Regulation.
The report notes that reserving practices in the jurisdiction align with US GAAP or US statutory standards and operate within a principles-based regulatory framework.
Regulatory developments are also influencing reinsurance strategies. The International Association of Insurance Supervisors has introduced the Insurance Capital Standard (ICS), a group-wide framework assessing capital adequacy across internationally active insurance groups. Full implementation was adopted in December 2024 following a monitoring phase from 2020 to 2024.
Under ICS, insurers must demonstrate that reinsurance arrangements result in actual risk transfer rather than serving solely as capital relief. The framework may affect how insurers structure transactions, particularly when dealing with jurisdictions that are not recognized under equivalent outcomes.
In the United States, Actuarial Guideline LV (AG55), adopted in August 2025, sets requirements for evaluating reserve adequacy in asset-intensive reinsurance transactions. The guideline applies to transactions exceeding thresholds such as $5 billion in reserve credit or modified coinsurance reserves, or lower thresholds tied to percentages of total reserves.
AG55 introduces asset adequacy testing, documentation requirements, and risk indicators that may prompt additional regulatory review, affecting execution timelines and transaction structuring.
The report also notes that the Cayman Islands Monetary Authority maintains more than 70 agreements with overseas regulators, including US authorities, supporting cross-border coordination.
The Cayman International Reinsurance Companies Association said the findings provide confirmation of the jurisdiction’s regulatory framework and oversight, which include policyholder protection and supervisory review.
International reinsurance continues to be used by US insurers as part of capital and risk management strategies, with jurisdictions such as the Cayman Islands participating in transactions tied to life and annuity business.
