Bermuda is expected to hold onto its dominant role in the booming offshore life reinsurance market, with Fitch Ratings citing the island’s regulatory framework, transparency measures and international recognition as key advantages.

The rating agency said Bermuda accounted for 85 per cent of all life reinsurance reserves ceded offshore at the end of 2025, as insurers keep moving capital-intensive liabilities to specialist reinsurers.

Offshore reinsurance reserves rose nearly 190 per cent from 2020 to reach $1.3 trillion last year, according to Fitch. Total American reinsurance reserves ceded — including domestic and offshore transactions — more than doubled to $2.7 trillion.

Fitch said the growth was driven by strong annuity sales, insurers wanting to release capital from legacy blocks of business and the expansion of partnerships between insurers and alternative investment managers.

It expects offshore reinsurance activity to remain elevated in the near to medium term, despite some moderation in annuity sales growth this year.

Jamie Tucker, a managing director at Fitch, said: “Offshore reinsurance continues to exhibit meaningful growth, which we forecast to persist.

“We expect Bermuda to represent the majority of offshore reinsurance, though other jurisdictions are also growing. Fitch views growth in these other jurisdictions cautiously, given their lower transparency and robustness, coupled with increased flexibility.”

The report distinguished between Bermuda and rival offshore centres, particularly the Cayman Islands.

Fitch described Bermuda as a “robust regulatory jurisdiction”, pointing to its Solvency II equivalence and National Association of Insurance Commissioners reciprocal jurisdiction status.

It also cited the Bermuda Monetary Authority’s 2024 reforms to its long-term insurance regime, known as the second consultation paper, or CPII. The measures tightened reserving and capital standards, enhanced governance requirements and made the Bermuda Solvency Capital Requirement more risk-sensitive.

Bermuda has also introduced new disclosures for commercial long-term insurers, requiring more detailed information on assets, liabilities and asset-liability management from year-end 2025 reporting.

By contrast, Fitch said other offshore regimes, including Cayman, were less robust, more flexible and less transparent, and therefore more susceptible to regulatory arbitrage.

The rating agency said it viewed regulatory arbitrage unfavourably and assessed capitalisation, investment risk and reinsurance use on a consolidated basis when evaluating rated insurers.

Cayman and Barbados have nevertheless grown quickly. Reserves ceded to Cayman more than doubled from $31 billion in 2021 to $80 billion in 2025, while Barbados rose from $21 billion to $51 billion. Each remained more than $1 trillion behind Bermuda in assumed reinsurance reserves.

Fitch’s report said Bermuda’s ability to raise capital, including through sidecars, also drives its growth. Sidecars allow insurers to raise third-party capital for defined portfolios of business, while offshore reinsurance platforms can help insurers manage capital needs and new-business volumes.

The rating agency said 72 per cent of offshore reinsurance at year-end 2025 was affiliated, suggesting that capital optimisation was often a greater driver than genuine risk transfer.

Alternative investment manager-linked reinsurers accounted for just over $1.1 trillion, or 44 per cent, of all reserves ceded in 2025, up from about $400 billion, or 30 per cent, in 2021.

Fitch said large block transactions and alternative asset managers’ ability to originate less-liquid investments were likely to keep the market growing. It cautioned, however, that rapid growth and large transactions could increase counterparty-credit exposure.