Best’s Special Report: Unaffiliated Offshore Reinsurance Transactions Fuel Asset-Intensive Market Growth in 2025
The use of offshore reinsurance continued to expand across the life and annuity insurance market in 2025, with annuity reserves ceded to offshore entities now accounting for more than half of total ceded annuity reserves. According to a new report from AM Best, insurers are increasingly using offshore reinsurance structures as they seek to manage risk-based capitalization requirements, optimize balance sheets and remain competitive in a rapidly changing market.
The findings are included in AM Best’s latest Best’s Special Report, titled “Unaffiliated Offshore Reinsurance Deals Drive Asset-Intensive Reinsurance Market in 2025.” The report forms part of the ratings and research organization’s broader examination of the global reinsurance sector ahead of the Rendez-Vous de Septembre in Monte Carlo.
The report highlights several important developments within the asset-intensive reinsurance market, including the growing importance of unaffiliated transactions, increasing use of offshore structures, the changing role of Bermuda and the Cayman Islands, and the significant participation of private equity and asset management-backed insurers.
Together, these trends demonstrate how the life and annuity reinsurance market is evolving as insurers look for ways to manage capital, improve financial flexibility and respond to changing competitive conditions.
Offshore Reinsurance Accounts for More Than Half of Ceded Annuity Reserves
One of the most notable findings in AM Best’s analysis is the continued increase in the proportion of annuity reserves transferred to offshore reinsurers.
In 2025, offshore reinsurance accounted for nearly 56% of ceded annuity reserves, including modified coinsurance, or modco, reserves.
The figure represents a significant development in the life and annuity reinsurance sector because it demonstrates how extensively insurers are using offshore structures to manage large blocks of annuity business.
Annuity products can create substantial long-term capital and asset management requirements for insurers. As insurers compete for new business and manage existing portfolios, reinsurance can provide a mechanism for transferring portions of those risks and associated capital requirements to other entities.
Offshore reinsurance arrangements can be particularly attractive in this environment because certain jurisdictions have developed sophisticated regulatory frameworks and financial infrastructure designed to support large-scale reinsurance transactions.
However, AM Best also emphasizes that these arrangements can introduce additional risks and complexity that need to be considered when assessing an insurer’s overall financial strength.
Bermuda Remains the Dominant Offshore Domicile
Bermuda continues to be the leading offshore jurisdiction for asset-intensive reinsurance transactions.
The island has established itself as one of the world’s most important reinsurance centers, with a large concentration of specialized insurers, reinsurers, alternative capital providers and insurance-linked structures.
Its position in the asset-intensive reinsurance market reflects years of development in life and annuity reinsurance, as well as the presence of financial institutions with expertise in managing large portfolios of insurance assets and liabilities.
However, AM Best’s report identifies another important trend: the Cayman Islands increased their share of the offshore reinsurance market during 2025.
The growth in Cayman Islands activity was driven significantly by several recently established sidecars.
Sidecars can provide an alternative structure through which capital providers participate in insurance or reinsurance risks. Their increased use highlights the growing role of alternative capital and investment management structures in the reinsurance ecosystem.
The development also demonstrates that offshore reinsurance is not concentrated entirely in a single jurisdiction. As market participants explore different structures and sources of capital, multiple offshore domiciles may continue to play important roles.
Private Equity and Asset Managers Drive Offshore Activity
Another major theme emerging from the report is the substantial role of insurers owned by private equity firms and asset managers.
AM Best found that private equity and asset manager-owned insurers account for nearly half of reserves ceded to offshore affiliates, despite representing only about one-quarter of total reserves ceded.
This disparity indicates that private equity and asset manager-backed insurers are more likely than other market participants to make extensive use of offshore affiliated reinsurance arrangements.
The trend reflects the broader evolution of the insurance industry, where investment firms have increasingly become involved in life and annuity businesses.
Private equity firms and asset managers often bring expertise in portfolio management, alternative investments and capital allocation. When combined with insurance liabilities, these capabilities can support strategies designed to manage large pools of assets and long-duration obligations.
For insurers with investment-oriented ownership structures, reinsurance can form part of a broader capital management strategy.
Jason Hopper, Associate Director of Industry Research and Analytics at AM Best, noted that private equity and asset manager-owned insurers generally lean more heavily into this strategy.
According to Hopper, these companies account for nearly half of reserves ceded to offshore affiliates while representing only approximately one-quarter of total reserves ceded.
The figures highlight the extent to which ownership structure can influence reinsurance strategy.
Unaffiliated Transactions Gain Momentum
The report also identifies a significant shift in the balance between affiliated and unaffiliated reinsurance transactions.
In 2025, unaffiliated reinsurance deals outpaced affiliated transactions for the first time in three years.
This development is particularly notable because it suggests that insurers are increasingly turning to external reinsurance partners rather than relying exclusively on affiliated entities within their corporate groups.
The scale of these transactions is substantial.
The 10 largest unaffiliated reinsurance transactions announced in 2025 totaled more than $107 billion. That figure was dramatically higher than the approximately $35 billion represented by the 10 largest unaffiliated transactions in 2024.
The increase illustrates the growing scale and significance of unaffiliated reinsurance activity in the life and annuity market.
Large unaffiliated transactions can allow insurers to transfer substantial amounts of risk and associated liabilities to independent reinsurers.
For reinsurers, meanwhile, these transactions provide opportunities to expand their portfolios and gain exposure to large blocks of long-term insurance business.
The growth also points to increasing confidence in the capacity of specialized reinsurance markets to absorb large transactions.
Why Asset-Intensive Reinsurance Remains Competitive
The asset-intensive reinsurance market remains highly competitive, even as annuity growth at primary insurers begins to slow.
The combination of large existing annuity portfolios and changing growth rates can increase pressure on insurers to manage capital more efficiently.
Reinsurance can provide an important tool in this environment.
By transferring portions of their insurance obligations to reinsurers, primary insurers may be able to manage capital requirements, adjust risk exposures and create additional financial flexibility.
At the same time, reinsurers compete to attract these transactions because large life and annuity blocks can provide long-duration business opportunities.
The result is a market in which insurers and reinsurers are increasingly evaluating transaction structures, capital efficiency and asset management capabilities.
The growing involvement of private equity firms, asset managers and alternative capital providers adds another dimension to that competition.
Cross-Border Transactions Create Additional Complexity
While offshore reinsurance can provide financial and capital management benefits, AM Best cautions that cross-border transactions also create additional operational complexity.
Reinsurance arrangements involving multiple jurisdictions may require insurers to manage different regulatory environments, reporting requirements, accounting considerations and operational processes.
There can also be differences in transparency and visibility between the cedent, reinsurer and other entities involved in a transaction.
AM Best refers to these issues as creating potential complexity and opacity.
This is particularly relevant when insurers transfer significant portions of their annuity reserves to offshore entities.
Although the transactions can help manage risk-based capitalization, an insurer’s reliance on reinsurance also becomes an important consideration when assessing its overall financial strength.
The quality of the reinsurer, the structure of the transaction and the appropriateness of the reinsurance program can all affect how the arrangement influences an insurer’s balance sheet strength.
Reinsurance Dependence Can Affect Financial Strength Assessments
For insurers, transferring risk through reinsurance does not necessarily eliminate the underlying financial considerations.
When a company becomes heavily dependent on reinsurance, the financial strength of its counterparties becomes increasingly important.
A primary insurer may reduce its direct exposure to certain liabilities through reinsurance, but it remains important to evaluate whether the reinsurer has sufficient financial resources to meet its obligations.
The structure of the reinsurance agreement also matters.
Factors such as collateral arrangements, counterparty quality, asset composition, liquidity and regulatory requirements can influence the overall risk profile.
AM Best incorporates these considerations into its rating analysis.
The report notes that reinsurance dependence, reinsurance quality and the appropriateness of reinsurance programs can have negative effects on an insurer’s overall balance sheet strength assessment.
This does not mean offshore reinsurance is inherently negative. Rather, it underscores the importance of evaluating the full risk profile of the transaction rather than focusing only on the capital relief or risk-transfer benefits.
Accounting Complexity
Offshore reinsurance transactions can also create accounting challenges.
Cross-border structures may involve affiliated entities, captive reinsurers, sidecars and other specialized arrangements that can make financial reporting more complicated.
For analysts and stakeholders, understanding the economic substance of these structures can therefore require careful examination of both the ceding insurer and the reinsurer.
AM Best addresses some of these concerns by evaluating risks at the consolidated level.
The organization considers the ceding insurer and affiliated captive reinsurance company together when performing its global Best’s Capital Adequacy Ratio, or BCAR, calculations.
This approach allows AM Best to assess the broader financial position of the insurance group rather than relying solely on the apparent capital impact of an individual reinsurance transaction.
BCAR Provides a Broader View of Capital Adequacy
Best’s Capital Adequacy Ratio is an important component of AM Best’s analysis of insurers’ capitalization.
Capital adequacy is particularly important in the life and annuity sector because insurers may have significant long-term obligations and substantial investment portfolios.
When reinsurance transactions transfer liabilities between entities within a corporate group, assessing the financial position of the group as a whole can provide a more comprehensive picture.
By incorporating affiliated captive reinsurance entities into its global BCAR calculations, AM Best seeks to account for the risks associated with these structures at the consolidated level.
This is important in an environment where affiliated offshore reinsurance has become increasingly significant.
The approach also illustrates why the reported level of ceded reserves alone does not provide a complete picture of an insurer’s financial position.
Alternative Capital Continues to Reshape Reinsurance
The growing use of offshore structures and sidecars is part of a broader transformation in the global reinsurance market.
Alternative capital has become increasingly important as investors seek opportunities to participate in insurance-related risks.
Private equity firms, asset managers and other institutional investors have shown growing interest in insurance because of the potential for long-duration liabilities and investment opportunities associated with large pools of insurance assets.
As these investors become more involved, reinsurance structures may continue to evolve.
Sidecars and affiliated offshore entities can provide mechanisms for deploying capital into insurance and reinsurance strategies.
This development could increase the availability of capital for large transactions while also creating additional complexity for regulators, ratings agencies and insurers.
Global Reinsurance Market Under the Spotlight
AM Best’s report is part of its broader analysis of the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo.
The annual gathering is an important event for global insurers, reinsurers, brokers, investors and other industry participants.
AM Best is expected to publish additional research covering major areas of the reinsurance market, including rankings of leading global reinsurance groups and analysis of insurance-linked securities, Lloyd’s, life and annuity reinsurance, health reinsurance and regional markets.
Together, these reports are expected to provide a broader view of the forces shaping the global reinsurance sector.
What the 2025 Trends Mean for Insurers
The developments highlighted in AM Best’s report suggest that reinsurance will remain an important strategic tool for life and annuity insurers.
The continued growth of offshore ceded reserves demonstrates that insurers are willing to use international structures to manage capital and risk.
At the same time, the sharp increase in unaffiliated reinsurance transactions indicates that external reinsurance capacity is playing a growing role in the market.
The involvement of private equity and asset manager-owned insurers is another significant development.
These companies’ disproportionately high use of offshore affiliated reinsurance suggests that ownership and investment strategies are influencing how insurers approach capital management and risk transfer.
However, insurers will need to balance the benefits of these arrangements against the operational, accounting and counterparty risks associated with cross-border reinsurance.
The asset-intensive reinsurance market is likely to remain an important area of focus as insurers, reinsurers and investors continue to navigate changing market conditions.
Slower annuity growth at primary insurers does not necessarily reduce the importance of reinsurance. Instead, it may encourage insurers to focus more heavily on optimizing existing portfolios, managing capital requirements and improving the efficiency of their balance sheets.
At the same time, the continued presence of large institutional investors and asset managers is likely to support demand for innovative reinsurance structures.
Bermuda is expected to retain its position as a leading offshore domicile, while the growing role of the Cayman Islands and other structures could further diversify the market.
The substantial increase in unaffiliated transactions during 2025 also suggests that competition among reinsurers for large blocks of life and annuity business is intensifying.
Ultimately, the market will continue to be shaped by the balance between capital efficiency, risk transfer, investment strategy and financial strength.
AM Best’s analysis highlights that offshore reinsurance can provide meaningful benefits to insurers seeking to manage risk-based capitalization and remain competitive. However, the growing complexity of these arrangements means that stakeholders must also carefully assess counterparty quality, operational risk, accounting treatment and overall reinsurance dependence.
As the life and annuity reinsurance market continues to evolve, the record scale of unaffiliated transactions, increased offshore activity and expanding participation of private equity and asset managers will remain key trends to watch.
The developments of 2025 demonstrate that asset-intensive reinsurance is no longer simply a niche capital-management strategy. It has become an increasingly important component of the global life and annuity insurance ecosystem, influencing how insurers manage risk, deploy capital and position themselves for long-term growth.
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