Bermuda’s reputation as a top-tier reinsurance jurisdiction has been pulled into an offshore regulatory spat, despite not being the primary focus, following a high-profile American media report critical of the Cayman Islands’ growing role in life and annuity deals.

An October 6 Wall Street Journal article, titled “Why Insurers Are Taking Your Money to the Cayman Islands”, raised concerns over the $75 billion in American life insurance liabilities reinsured through Caymanian-based firms.

Offshore life reinsurance as a whole has exploded in use in recent years, with life insurers’ reserves ceded to all offshore reinsurers jumped to over $1.1 trillion in 2024.

However, the piece claimed offshore reinsurers “don’t require [insurers] to hold as much extra capital in case their investments turn sour” and that they “also don’t necessarily have to say who is watching over the money”.

Cayman’s industry hit back in a public letter, calling the story misleading and defending its oversight regime.

“Cayman’s framework features stringent solvency testing, independent audits and continuous regulatory supervision,” wrote Greg Mitchell, chairman of the Cayman International Reinsurance Companies Association.

The letter added that transactions involving Cayman reinsurers are “subject to prior review and approval by both the relevant US regulators and by [the Cayman Islands Monetary Authority].”

Furthermore, in rebutting the concerns, Circa pointed out: “The majority of examples cited in the story relate to transactions in Bermuda”.

The WSJ article referenced several Bermudian-based entities among the complex offshore reinsurance structures under scrutiny.

It cited Iowa-based American Equity Investment Life Insurance, owned by Brookfield Wealth Solutions, which had $24 billion in liabilities reinsured with Bermudian-based Freestone Re, an affiliate of the same parent company.

The piece also pointed to Apollo Global Management’s Bermudian-based reinsurer Athene, noting that the firm conducts its offshore business in Bermuda and the US, explicitly avoiding Cayman.

Bermuda reinsurers hold over $900 billion in American life and annuity liabilities, more than 80 per cent of the offshore total, while Cayman reinsurers hold around 10 per cent.

Bermuda also operates under a more conservative, transparent regime than Cayman.

The Bermuda Monetary Authority enforces capital standards aligned with European Solvency II rules and has been designated a “reciprocal jurisdiction” by the US National Association of Insurance Commissioners — a recognition Cayman has not yet achieved.

By contrast, Cayman reinsurers must collateralise their obligations to American insurers, typically with assets held in American-based trusts.

While Cayman regulators say their approach aligns with international standards, critics question its depth.

In fact, Marc Rowan, CEO of Apollo, is among those urging American regulators to act.

“Reserves have moved offshore to the Cayman Islands with a fraction of the capital of the US or the Bermuda system, putting the system at risk,” Mr Rowan told shareholders in February.

David Chavern, president and CEO of the American Council of Life Insurers, noted in his own letter that “very little [capital] has actually left the United States” and emphasised that “life insurers pay the benefits”— not the reinsurers.