U.S. annuity sales reached $104.6 billion in the first quarter of 2026, a tenth consecutive quarter above $100 billion, after a full-year 2025 total of $464.1 billion that set a fourth straight annual record in LIMRA's data. The reserves those sales create are being financed differently than they were a decade ago, and AM Best has spent 2026 documenting how.

Key Takeaways

  • 328% reinsurance leverage for the life sector at the end of 2024, against roughly 200% a decade earlier, with ceded general account reserves doubling between 2016 and 2024.
  • Nearly two notches of decline in the reserve-weighted average issuer credit rating across the annuity block since 2007. About a third of annuity reserves sit with 95 companies whose long-term issuer credit ratings fell over that period.
  • 25% of U.S. individual annuity liabilities were controlled by private equity-backed insurers by 2024, and they wrote 35% of new fixed and fixed indexed sales, up from 7% in 2011.
  • 38% of life insurer portfolios now sit in private placements, mortgage loans, real estate and Schedule BA assets, up from 30% in 2018.

The Volume Print

The quarter was 2% below Q1 2025 and the composition moved more than the total did.

Product TypeQ1 2026 SalesYoY ChangeNote
Fixed-Rate Deferred (FRD)$34.0B-16%Still one-third of total market
Fixed Indexed (FIA)$26.6B-4%Losing share to RILAs
Registered Index-Linked (RILA)$21.2B+21%30th consecutive growth quarter
Traditional Variable (VA)$16.1B+9%3rd consecutive growth quarter
Single Premium Immediate (SPIA)$3.7B+22%Steady rates sustain demand
Deferred Income (DIA)$1.0B+6%Niche but growing
Total$104.6B-2%10th straight $100B+ quarter

Bryan Hodgens of LIMRA put the level rather than the direction first: "The threshold for annuity sales appears to be stabilized above $100 billion, highlighting the continued interest in principal protection and guaranteed income." Fixed-rate deferred products pulling back 16% is the yield curve normalizing, and RILA growth of 21% absorbing that shift is the demand moving rather than leaving.

Industry capital and surplus reached $538.8 billion at Q3 2025, up 4.7%, with AM Best estimating $564.3 billion for 2026. The aggregate is healthy. The question AM Best's April report raises is what it is made of.

The Reserves Went Somewhere Else

Individual annuity reserves now exceed 36% of total U.S. life and annuity segment reserves, up from 32% before 2008. The financing of that block is where the change is.

Sector reinsurance leverage ended 2024 at 328%, against roughly 200% ten years earlier, and ceded general account reserves doubled between 2016 and 2024. The number of companies using reinsurance sidecars tripled since 2021, with reserves ceded into those structures rising threefold in two years.

The model behind it is legible. A sponsor acquires or forms a life platform, cedes blocks to an affiliated reinsurer usually domiciled in Bermuda, and invests the backing assets through an affiliated manager specialising in private credit, CLOs and structured product. The gross yield runs 40 to 80 basis points above an investment-grade corporate portfolio, and the offshore capital requirement is often lower than the onshore one. In an AM Best poll, 90% of insurance executives named capital efficiency as the primary reason for using offshore reinsurance.

That spread is what funds a competitive credited rate, which is where it reaches the pricing actuary. A competitor offering a higher rate off a higher-yielding, less liquid portfolio backed by affiliated reinsurance sets a benchmark that has to be matched with the same structure, differentiated on features, or conceded as share.

The reserving side has a specific number to work with now. Actuarial Guideline 55, adopted in August 2025, requires the appointed actuary to analyse reinsurance collectability and counterparty risk within asset adequacy testing. Run that against 328% leverage: a 10% impairment of the reinsurer's asset portfolio consumes a substantial part of the capital cushion the cession was recorded as providing. The credit quality trend feeds the same calculation, because a reserve-weighted issuer rating that has fallen nearly two notches since 2007 is the block those assets sit behind.

The Diversification Was Not Bought

Reinsurance is a legitimate capital tool, and the objection is not that reserves went offshore. Total offshore life reinsurance reserves transferred by U.S. insurers passed $1.1 trillion by the end of 2024, against $2.4 trillion of total cessions, so nearly half of all ceded reserves now leave the country. Bermuda takes more than 40% of total ceded reserves and over 60% of newly originated offshore cessions, under a Monetary Authority that has tightened liquidity ratios and scenario-based capital testing in response.

The problem is affiliation, not jurisdiction. Nearly 70% of offshore reserves were ceded to affiliated reinsurers, and firms backed by asset managers or PE sponsors accounted for 46% of those affiliated transactions. Apollo's Athene and KKR's Global Atlantic each held roughly a fifth of their investment portfolios in loans to affiliated funds at year-end 2024, while affiliated investments across life and annuity insurers rose more than 17% in 2024 to exceed $373 billion.

When the cedant, the reinsurer, the asset manager and the originator sit inside one group, the risk transfer is accounting rather than economic. A private credit portfolio running elevated defaults impairs the reinsurer and returns the loss to the cedant's balance sheet, which is the outcome an arm's length cession exists to prevent. AM Best's phrase for what this produces is "operational complexity and opaqueness," and its concerns were set against the sales record in May: heightened reinsurance dependence, weaker financial flexibility, pressured internal capital and deterioration in asset quality.

What is not yet in place is the capital treatment that would price it. The CLO capital factor overhaul has already been extended a year and slips to year-end 2027 if proposals are not adopted on time. The collateral loan look-through is delayed to 2027, leaving a single uniform 30% charge on collateral loans backed by equity interests where the ACLI has proposed a 10% to 90% range. The negative IMR accommodation under INT 23-01 runs through December 31, 2026. Revisions to SSAP No. 52 covering funding agreement-backed notes were exposed only through May 1, 2026, targeting year-end 2026 disclosure.

Each is a reasonable pace for a rule. Together they mean the NAIC's asset-mix data showing 38% of portfolios in less liquid classes describes a book that was built under the old charges and will still be on the balance sheet when the new ones arrive.

Further Reading

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