Regulatory reforms support NA life insurers’ ratings: Fitch
- August 8, 2025
- Posted by: Beth Musselwhite
- Category: Insurance
Enhanced regulatory standards are supporting the ratings of North American life insurers, which are expected to maintain strong balance sheets, according to Fitch Ratings.
The life insurance sector is becoming increasingly complex, with the growth of offshore reinsurance, tie-ups with alternative investment managers, and higher allocations to illiquid structured assets. This has created a rapidly evolving regulatory landscape in North America.
Recent block reinsurance transactions have had a largely neutral impact on ratings. While cedants often gain an improved business risk profile, this is offset by reduced diversification.
The National Association of Insurance Commissioners (NAIC) initiatives are focused on increasing transparency and improving monitoring to ensure a thorough understanding of insurers’ risks. These initiatives include the bond classification project, CLO capital charges, asset adequacy testing for reinsurance transactions, and private letter ratings for investment securities.
Since 2019, U.S. life insurers have nearly doubled their ceded reserves, rising from $710 billion to $1.3 trillion by 2023. Over the same period, reserves ceded to offshore jurisdictions have nearly quadrupled, surpassing $450 billion.
In response, both the NAIC and the Bermuda Monetary Authority have introduced regulatory reforms to enhance transparency and keep pace with the industry’s rapid evolution.
The appeal of incremental yield, along with long-duration and illiquid liabilities, has driven an increase in acquisitions and partnerships between life insurers and alternative investment managers— a trend Fitch expects to persist in 2025.
Higher allocations to less-liquid private assets with complex structures, such as CLOs, could be credit-negative, as they add incremental investment and asset risks, according to Fitch.
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