Bermuda continues to maintain its role as a driving force in offshore reinsurance, accounting for more than 40 per cent of total ceded reserves for US life/annuity writers in 2024, according to a new AM Best report.

The newly issued Best’s special report, Bermuda Remains the Largest Offshore Life/Annuity Reinsurance Domicile, also notes that the island accounted for over 60 per cent of reserves ceded for L/A transactions effective in 2023 and 2024.

However, the growth in ceded reserves from US L/A insurers slowed to 6.4 per cent in 2024, compared with more than 10 per cent growth in each of the previous three years.

“Bermuda has a long history of reinsurance regulator accessibility, along with solid networks of legal, actuarial and accounting expertise,” said Jason Hopper, associate director, AM Best. “Capital efficiency tends to be cited as the primary business rationale for using offshore reinsurance.”

The report cites the ageing US population and higher interest rates as drivers in the strong annuity growth over the past two-plus years.

While the growth tapered off in 2024, it is expected to continue, and more companies may look to reinsurers to manage growth and capital levels.

AM Best said that affiliated offshore reinsurance can provide country-risk diversification and capital-efficiency, which supports balance sheet growth. Yet it can also provide accounting and tax benefits.

“However, cross-border reinsurance introduces operational complexity and opaqueness, which may complicate analysis,” said Jacob Conner, associate analyst at AM Best.

According to the report, nearly 70 per cent of reserves ceded offshore go to affiliates.

Companies with asset manager/private equity sponsors comprise 46 per cent of reserves ceded to offshore affiliates.

The report also includes data on US life/annuity insurers, detailing the highest share of in-force ceded reserves offshore affiliates, a breakdown of in-force reserves assumed by region and a ranking of the largest reinsurance transactions for ceded reserves in 2024.