Offshore Life Reserves Reached $1.3 Trillion, and 72% Never Left the Group

The affiliated share decides what the headline number means. US life insurers had ceded $1.3 trillion of reserves offshore by year-end 2025, nearly double the 2020 level, and 72% of it went to affiliated reinsurers (Fitch Ratings, via Reinsurance News, 10 September 2026). Affiliated cessions move required capital between legal entities while the same economic owner keeps the same policyholder obligations.

Bermuda holds 85% of the offshore total, and the share ceded to reinsurers tied to alternative investment managers reached 44%, up from 30% in 2021. Fitch reviews all metrics, capitalisation included, on a consolidated basis that takes account of reserves ceded to offshore affiliates, which puts a rating opinion and a ceding company's risk-based capital ratio on opposite sides of the identical transaction.

Key Takeaways

72% of the $1.3 trillion ceded offshore at year-end 2025 went to affiliates (Fitch, September 2026), so the statutory relief accrues to one ceding legal entity while the consolidated group retains the block it financed.
44% of ceded reserves now sit with reinsurers affiliated with alternative investment managers, against 30% in 2021 (Fitch, September 2026). The cession rebuilds the asset portfolio; the mortality and longevity assumptions travel unchanged.
$464.1 billion of US retail annuity sales in 2025, a fourth consecutive record and 7% above 2024 (LIMRA, 2026), is the origination that feeds the cessions and explains why the growth tracks deposit gathering.
$101 billion in the Cayman Islands life and annuity sector at end-2025, against $23 billion in 2020 (The Royal Gazette, August 2026), makes the fastest-growing offshore venue the one Fitch treats as most exposed to regulatory arbitrage.
Year-end 2027 is the target for the NAIC's proposed reinsurance recapture RBC factor, scoped to reinsurers outside reciprocal jurisdictions (Norton Rose Fulbright, August 2026). Bermuda's reciprocal status places 85% of the offshore book beyond its reach.

What the $1.3 Trillion Counts

The figure is a stock, taken from Schedule S of the statutory annual statement at a single balance-sheet date, so it accumulates every treaty still in force and every block financed in prior years. It measures reserves ceded by US-domiciled life insurers to reinsurers domiciled outside the United States, which is a narrower population than the industry's full reinsurance book.

That wider book is larger and growing on the same slope. Total reserves ceded by US life insurers reached $2.4 trillion at year-end 2024, from $2.0 trillion a year earlier, with offshore cessions accounting for a little over $1.1 trillion of the 2024 figure (Fitch via The Royal Gazette, July 2025). Bermuda's share of the offshore total moved from 84% to 85% across the year.

The 72% affiliated split is what separates two transactions that look identical in the ceded column. An unaffiliated cession prices risk across an arm's-length boundary and lands the block on a third party's balance sheet. An affiliated cession relocates the same liabilities inside one consolidated group, under a treaty whose terms both counterparties control.

Fitch is explicit that the jurisdiction carrying most of this is a supervised one. The agency "considers Bermuda's regulatory regime to be increasingly robust and transparent, supported by Solvency II equivalence and NAIC reciprocal jurisdiction status" (Fitch Ratings, 10 September 2026), and views the Cayman Islands as more susceptible to regulatory arbitrage.

How the Affiliated Cession Moves Capital

Statutory reserve credit is the mechanism. When a US ceding company cedes an asset-intensive block to a reinsurer in a reciprocal jurisdiction, it removes the reserve from its own statutory balance sheet without posting collateral, and the C-1 asset charges and C-3 interest-rate charges attaching to that block leave its risk-based capital formula with it. Required capital falls at the ceding entity on the day the treaty incepts.

What the treaty relocates the liability into is a different valuation basis. Bermuda's scenario-based approach, refined under the Bermuda Monetary Authority's CP2 reforms that came into force on 31 March 2024, discounts liability cash flows against the yield on the assets actually backing them, subject to prescribed haircuts. On a long annuity block, that produces a smaller technical provision than CARVM on the same projected payments.

The 44% now ceded to alternative-manager-affiliated reinsurers shows where the economics sit. Moving a block to such a platform rebuilds the supporting portfolio toward privately originated credit and structured assets, and swaps a US C-1 charge for a BSCR charge calibrated differently on the same paper. Mortality, longevity and lapse assumptions cross the treaty untouched, which is why offshore volume tracks annuity origination.

Composition of US life insurers' offshore ceded reserves
Measure	Year-end 2025	Prior reading
Reserves ceded offshore	$1.3 trillion	Nearly half that level in 2020
Ceded to affiliated reinsurers	72%	Capital management cited as main driver
Ceded to alternative-manager affiliates	44%	30% in 2021
Bermuda share of offshore total	85%	84% at year-end 2024
Bermuda long-term sector assets	Over $1.5 trillion	Reciprocal jurisdiction status
Cayman life and annuity sector	$101 billion	$23 billion in 2020

Offshore, affiliated, alternative-manager and Bermuda figures from Fitch Ratings, September 2026; Bermuda and Cayman sector assets from The Royal Gazette, August 2026.

Fitch then reverses the balance-sheet effect on the ratings side. All metrics, capitalisation included, are reviewed on a consolidated basis taking account of reserves ceded to offshore affiliates, so the group is assessed as though the 72% never moved. The distance between a ceding company's improved RBC ratio and its unchanged consolidated assessment is a usable read on how much of the relief is regime and how much is economics.

The jurisdictional growth rates sharpen the same point. Cayman's life and annuity sector multiplied more than fourfold since 2020 while the offshore aggregate roughly doubled, so the venue Fitch flags for arbitrage risk is compounding at twice the market's pace off a small base.

Where the Recapture Charge Lands

On 14 August 2026 the NAIC's Financial Condition (E) Committee referred two life RBC changes to the Life Risk-Based Capital (E) Working Group. The first is a reinsurance recapture RBC factor applied to ceded reserves and modified coinsurance balances for reinsurers outside reciprocal jurisdictions, with overcollateralisation taken into account; the second aligns life credit-risk treatment with the property and casualty formula for lower-rated reinsurers. Both are prioritised for year-end 2027, on the committee's stated view that many state regulators believe the risk warrants immediate attention given continued growth in offshore reinsurance transactions.

The reciprocal-jurisdiction carve-out is what sizes the measure. Bermuda qualifies, so the charge reaches the roughly 15% of the offshore book held elsewhere, including Cayman's $101 billion, while the $1.1 trillion or so sitting in Bermuda falls outside it. Former Connecticut commissioner Thomas Leonardi framed the distinction as earned, telling The Royal Gazette that "jurisdictions like Bermuda have earned reciprocal status by demonstrating regulatory equivalence" (August 2026).

The other live control asks for disclosure and stops there. Actuarial Guideline 55 applied first to reserves reported in 2025 annual statements, with reports due 1 April 2026, and for its first year requires the ceding company to disclose asset adequacy results on asset-intensive treaties while leaving any additional reserve to the domestic regulator's judgment.

A recapture factor also asks a question the affiliated 72% answers awkwardly. It charges capital for the possibility that a treaty unwinds and the block returns to the ceding company, priced as counterparty stress. When the counterparty is a subsidiary of the same parent, recapture is a group decision rather than a default, and the capital that would have to absorb the returning reserves is the capital the structure was built to release.

Offshore Life Reserves Reached $1.3 Trillion, and 72% Never Left the Group

Key Takeaways

What the $1.3 Trillion Counts

How the Affiliated Cession Moves Capital

Where the Recapture Charge Lands

Further Reading

Sources