Fitch highlights strong growth in North American life reinsurance in 2024

According to Fitch Ratings, a credit rating agency, North American life reinsurance experienced significant growth in 2024, driven by expanding partnerships between insurers and alternative investment managers, increased reliance on offshore reinsurance platforms, and a record-setting year for annuity sales.

In its analysis, Fitch notes that reserves ceded by insurers—measured through reserve credit and modified coinsurance (modco) reserves reported in U.S. statutory filings—rose from $2.0 trillion in 2023 to $2.4 trillion in 2024.

Fitch Ratings emphasises that collaborations between re/insurers and alternative investment managers have been a major catalyst for this expansion.

These partnerships often take the form of sidecars and offshore reinsurance platforms, allowing life insurers to shed capital-intensive legacy liabilities more effectively. By the end of 2024, Fitch estimates that nearly 40% of ceded reserves were associated with entities connected to alternative investment managers, a trend that has continued to strengthen into 2025.

The agency also points to the growing use of offshore reinsurance platforms—primarily domiciled in Bermuda—as an important factor in the sector’s growth.

Fitch notes that Bermuda’s regulatory environment, which saw enhancements in 2024 including increased capital requirements and greater oversight, remains attractive to insurers because it offers a more economic and flexible framework compared to the US Bermuda, along with Barbados and the Cayman Islands, now accounts for approximately 95% of offshore ceded reserves, according to Fitch’s data.

Fitch Ratings attributes the surge in annuity sales to a combination of rising interest rates, an aging population, and strong capital positions within the industry. In 2024, retail annuity sales hit a new high of $434 billion, marking the fourth consecutive year of record sales.

Although Fitch expects sales growth to moderate in 2025 with interest rates projected to stabilise near 4.50% by year-end, the firm highlights that demand remains robust.

Fitch further explains that insurers are increasingly leveraging innovative reinsurance structures such as sidecars and offshore platforms in partnership with alternative investment managers. These vehicles offer enhanced capital management, allowing insurers to support new business volumes while optimising capital usage.

Sidecars generally take on all the business from their sponsoring insurers, whereas reinsurance platforms tend to start with business from their sponsors but are expected to gradually include third-party business. Fitch cautions, however, that rapid growth in these transactions can increase counterparty credit exposure and requires ongoing vigilance.

In examining recent market activity, Fitch Ratings observes that large block reinsurance deals have had mostly neutral effects on insurer credit ratings.

While cedants benefit from improved business risk profiles, reinsurers take on complex liabilities but manage them by resetting key assumptions. Fitch lists several high-profile transactions involving major insurers such as Lincoln National Corporation, MetLife, and Guardian Life Insurance Company, noting that this pattern of large deals is likely to continue.

Publicly traded insurers frequently divest complex or lower-return liabilities to free up capital, while reinsurance consolidators—many backed by alternative investment managers—seek to scale up and reposition assets toward less liquid strategies leveraging their investment expertise.

Looking ahead, Fitch anticipates that offshore reinsurance will remain a growing component of the North American life insurance market. The agency underscores that the ongoing demand for capital optimisation amid strong annuity sales and expanding partnerships supports this trend.

Fitch Ratings stresses the importance of evaluating reinsurance arrangements individually, taking into account jurisdictional regulatory environments, reserve requirements, and structural safeguards to ensure prudent risk management.

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.