Offshore Life Reserves Hit $1.3T, and 72% Stay Inside the Group

Affiliation, not geography, explains the capital result behind Fitch's headline. US life insurers ceded $1.3 trillion of reserves offshore at year-end 2025, and 72% went to affiliated reinsurers (Fitch Ratings, via Reinsurance News, September 2026). The legal entity sheds statutory strain while its consolidated group retains the policyholder exposure.

Bermuda holds 85% of the offshore total, while reinsurers tied to alternative investment managers hold 44%, up from 30% in 2021. Fitch reviews capitalisation on a consolidated basis that includes reserves ceded to offshore affiliates. The same treaty can lift the cedant's risk-based capital ratio while leaving the rating agency's group view largely unchanged.

Key Takeaways

72% of $1.3 trillion in offshore ceded reserves went to affiliates at year-end 2025 (Fitch Ratings, September 2026), leaving about $936 billion inside the same corporate group after the legal-entity transfer.
44% of offshore reserves were ceded to reinsurers tied to alternative investment managers, against 30% in 2021 (Fitch Ratings, September 2026), connecting the reserve transaction directly to the supporting asset strategy.
85% of the offshore total sits in Bermuda (Fitch Ratings, September 2026), a reciprocal jurisdiction whose 2024 capital reforms make it central to the market and largely outside the NAIC's proposed recapture charge.
$464.1 billion of US retail annuity sales in 2025, up 7% (LIMRA, March 2026), supplied the new liabilities that affiliated platforms can finance and reinsure.
$107 billion across the ten largest unaffiliated deals in 2025, up from $35 billion in 2024 (AM Best, August 2026), shows that new flow is shifting faster than the in-force stock.

The Affiliated Share Inside the $1.3 Trillion

Fitch's figure is an in-force stock drawn from Schedule S, Part 3, Section 1 of statutory annual statements. It combines reserve credit with modified coinsurance reserves for treaties still on the books. It therefore accumulates new annuity flow, legacy block transactions and prior-year cessions. It does not measure premiums written during 2025.

The official prior-year baseline confirms the scale. Total reserves ceded by US life insurers rose from $1.4 trillion in 2019 to $2.4 trillion in 2024, while offshore cessions more than doubled to above $1.1 trillion (Federal Insurance Office, September 2025). Nearly 70% of that offshore book was affiliated, and asset-manager or private-equity-sponsored insurers represented 46% of those affiliate cessions.

Fitch's 2025 reading extends that series: offshore volume increased again, while the affiliate share moved from nearly 70% to 72%. The mix therefore became more internal even as large third-party transactions accelerated. A gross cession measure alone misses the ownership relationship that determines whether another corporate balance sheet ultimately stands behind the policy risk.

Applying Fitch's 2025 shares produces two useful amounts: roughly $936 billion affiliated and about $1.1 trillion domiciled in Bermuda. Their intersection remains undisclosed, so the figures cannot establish how much of the affiliate total sits on the island. They do establish that most offshore reserve credit reflects a change in legal perimeter rather than an arm's-length transfer to independent capital.

Fitch also separates Bermuda from other offshore venues. The agency says it "considers Bermuda's regulatory regime to be increasingly robust and transparent" (Fitch Ratings, September 2026), citing Solvency II equivalence and NAIC reciprocal-jurisdiction status. Its caution is sharper for Cayman, where disclosure and capital treatment are more flexible.

Reserve Credit and Consolidated Capital

A cession replaces part of the domestic insurer's gross reserve position with reserve credit, a modified coinsurance balance or both. In funds-withheld and modco structures, assets can remain in the cedant's custody even as their economics support the reinsurer. The cedant's required capital can fall because reserve valuation, asset charges and counterparty treatment change with the treaty.

An arm's-length deal exchanges asset, liability and market risk for a claim on an independent reinsurer. An affiliate cession creates that same legal claim, but ownership makes the credit exposure partly circular at group level: weakness in the reinsurer and a call for parent support can arrive in the same stress. Fitch's consolidation removes that perimeter benefit from its capital assessment.

Bermuda's 2024 reforms tightened the receiving calculation. The Bermuda Monetary Authority's group solvency rules require well-matched, same-currency asset and liability portfolios under the scenario-based approach and run them through nine interest-rate scenarios (BMA, March 2024). The method reflects an illiquidity premium from supporting assets in liability discounting, subject to prescribed default and downgrade costs.

The rise from 30% to 44% tied to alternative investment managers shows why the asset calculation matters. The treaty leaves the annuity's mortality, longevity and lapse exposure in place while opening a different pool of private credit and structured assets to support it. Record retail production supplied the volume: 2025 annuity sales reached $464.1 billion, and 2026 began with two more quarters above $100 billion (LIMRA, March 2026).

Fitch's year-end 2025 offshore reserve composition
Measure	2025 reading	Comparison
Reserves ceded offshore	$1.3 trillion	Nearly double 2020
Affiliate share	72%	About $936 billion
Alternative-manager-linked share	44%	30% in 2021
Bermuda share	85%	About $1.1 trillion

Dollar estimates apply Fitch's reported shares to the $1.3 trillion total and are rounded.

Fitch then restores the group perimeter for its rating analysis. Capitalisation and other metrics include reserves ceded to offshore affiliates, so the rating view absorbs the same block the statutory cedant removed. The gap between legal-entity RBC relief and the consolidated assessment isolates the benefit created by changing regulatory perimeter from relief backed by independent risk-bearing capital.

The Jurisdictional Gap in the New Controls

Actuarial Guideline 55 became effective for reserves reported at December 2025 and made ceded reinsurance an integral part of cash-flow testing (NAIC, August 2025). Its first size test starts above $5 billion by counterparty; lower thresholds combine $1 billion, $500 million or $100 million with cedant reserve percentages. Reports were due in April 2026.

AG 55 tests whether combined post-reinsurance assets support the block under moderately adverse conditions. It can expose a reserve decrease created by different assumptions, excluded assets or aggressive reinvestment. It does not automatically restore the pre-reinsurance reserve. Additional reserves remain a company decision subject to the domestic regulator's judgment, so disclosure and capital relief can coexist after the first review.

The NAIC's next control cuts on jurisdiction. A July 2026 referral directs a recapture RBC factor for cessions to entities in non-reciprocal jurisdictions, reduced for overcollateralisation, and a rating-sensitive counterparty charge targeted for year-end 2027 (NAIC, July 2026). The working group exposed the proposal for 28 days through September 2026.

The referral provides a long baseline: reinsurance represented only 6% of policy obligations in 1999. The proposed factor now follows the transactions that preliminary AG 55 reviews associate with the deepest reductions in total asset requirements. That design leaves the much larger reciprocal-jurisdiction concentration to cash-flow testing, group supervision and rating analysis.

Bermuda's reciprocal status puts the jurisdiction holding 85% of offshore reserves beyond the recapture factor as drafted. Yet the NAIC's preliminary AG 55 review found unauthorized reinsurers generally served newer, smaller annuity writers with aggressive crediting rates and produced larger total-asset-requirement reductions than comparable Bermuda cessions. The highest measured relief sits in the smaller slice.

AM Best adds a flow complication: unaffiliated transactions overtook affiliated deals during 2025, with the ten largest rising above $107 billion. Fitch's consolidation addresses affiliation, while the proposed RBC factor addresses jurisdiction. A Bermuda affiliate can be consolidated by Fitch, tested under AG 55 and exempt from the recapture factor. One unchanged policyholder cash flow can therefore produce three different capital answers.

Offshore Life Reserves Hit $1.3T, and 72% Stay Inside the Group

Key Takeaways

The Affiliated Share Inside the $1.3 Trillion

Reserve Credit and Consolidated Capital

The Jurisdictional Gap in the New Controls

Further Reading

Sources