Talcott Financial Group has completed a $6.3 billion reinsurance transaction with Lincoln Financial, extending the transfer of legacy American life-insurance risk to the international group, which has a major Bermuda reinsurance platform.

The deal, effective yesterday, covers a run-off block of universal life policies with secondary guarantees, Talcott said. Lincoln will keep administering the policies and deal with customers.

When the transaction was announced in July, Lincoln said about $5.8 billion of the total related to in-force guaranteed universal life statutory reserves, or 37 per cent of its remaining block of such business. The balance, about $500 million, comprises funding-agreement liabilities.

Guaranteed universal life policies can be capital-intensive for insurers because they provide life cover for a fixed premium and may remain in force for decades. The liabilities expose the insurer to long-term mortality, customer lapse and interest-rate risks.

This hasdriven a major trend of major American lifecos offloading these legacy "run-off" blocks to offshore reinsurers—frequently based in Bermuda—to free up capital flexibility. For instance, in 2023, Prudential reached a landmark agreement to reinsure a $12.5 billion block of its guaranteed universal life statutory reserves with Bermudian-based Somerset Re.

For Lincoln, the agreement is part of a multiyear effort to reduce exposure to older life-insurance business and make its balance sheet less volatile. The company said in July that the deal was expected to improve its medium-term annual subsidiary remittances by $30 million to $40 million, despite an all-in statutory capital impact of about $200 million.

It follows a much larger 2023 agreement with Bermudian-based Fortitude Re, under which Lincoln transferred about $28 billion of universal life, MoneyGuard and fixed-annuity statutory reserves. Together, the Fortitude Re and Talcott transactions mean about 60 per cent of Lincoln’s original guaranteed universal life block has now been reinsured.

Talcott, which is backed by investment firm Sixth Street, said the agreement is its second with Lincoln after a variable-annuity flow reinsurance transaction announced in 2021.

Imran Siddiqui, Talcott’s chief executive, said when the latest deal was announced that it was about the group’s expanding scale and its role as a risk-transfer partner for insurers.

While neither company identified the Talcott subsidiary that assumed the Lincoln liabilities, the transaction adds to the growth of long-term reinsurance platforms linked to Bermuda.

In August, Talcott and Goldman Sachs launched West Grove Re, a Bermudian-domiciled reinsurance sidecar capitalised with about $1 billion. The vehicle was created to give Talcott access to third-party capital and participate in quota-share arrangements covering certain US annuity business.