Offshore reinsurance arrangements accounted for an increasing proportion of ceded annuity reserves during 2025, with the share rising to more than half of the total as insurers sought to manage capital requirements in an increasingly competitive market, according to AM Best, the global insurance credit rating agency, data provider and industry analyst.
AM Best outlined the findings in its Best’s Special Report, Unaffiliated Offshore Reinsurance Deals Drive Asset-Intensive Reinsurance Market in 2025. The report is part of the company’s wider assessment of the global reinsurance market published ahead of the Rendez-Vous de Septembre in Monte Carlo.
AM Best said the asset-intensive reinsurance market continued to face strong competition during the year, while slower growth in annuity business among primary insurers contributed to greater use of reinsurance across the life and annuity sector.
The company found that offshore arrangements represented almost 56% of ceded annuity reserves in 2025 when modified coinsurance (modco) reserves were included. Bermuda remained the largest offshore jurisdiction for these transactions, although AM Best reported that the Cayman Islands gained market share during the year. The company linked much of that growth to a small number of newly established sidecars.
According to AM Best, the increase in reserves transferred to offshore affiliated reinsurers was largely associated with insurers backed by private equity firms and asset managers.
“Private equity/asset manager-owned insurers generally lean more into this strategy, as these companies account for nearly half of reserves ceded to offshore affiliates, but account for only one-quarter of total reserves ceded,” added Jason Hopper, Associate Director, Industry Research and Analytics, AM Best.
AM Best further reported a shift in the balance between affiliated and unaffiliated reinsurance transactions. Unaffiliated deals exceeded affiliated transactions in 2025 for the first time in three years, with the 10 largest unaffiliated transactions reaching a combined value of more than $107 billion. This compared with approximately $35 billion across the 10 largest transactions in 2024.
The company said the growing use of cross-border reinsurance can create additional operational challenges and make some arrangements more difficult to assess. AM Best noted that offshore reinsurance can help insurers manage risk-based capital requirements, but said factors such as dependence on reinsurance, counterparty quality and the suitability of reinsurance structures can influence its assessment of an insurer’s balance sheet strength.
AM Best also highlighted the potential accounting complexities associated with reinsurance transactions involving offshore entities. The company said it considers these risks on a consolidated basis, taking into account both the ceding insurer and its affiliated captive reinsurer when calculating its global Best’s Capital Adequacy Ratio (BCAR).
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