The past few years have seen a robust increase in the growth of offshore life reinsurance markets, most notably in Bermuda and Cayman. US life insurers alone have ceded life and annuity business backed by around $800 billion in reserves to offshore reinsurers since 2017, according to Moody's.
In particular, there has been increased activity by life insurance groups setting up affiliated re/insurers in Bermuda and Cayman while the interest rate environment has been a major challenge for life insurance entities, given the long tail nature of the business and how it impacts their asset management strategies. Ceding to an offshore reinsurer allows insurers to benefit from greater capital efficiency and control around capital management. Demographics have also been a major driver, with a growing middle class having a demand for life and savings products and an aging population seeking retirement solutions.
Beyond the obvious financial incentives, Bermuda and Cayman offer numerous draw cards as life reinsurance jurisdictions, both in the current climate and moving forwards. These draw cards include a concentration of expertise in one place, a reputation for innovation and prudent — yet responsive — regulatory regimes.
This whitepaper considers the key drivers behind the recent growth in offshore life reinsurance, against the backdrop of an evolving risk landscape and challenging macroeconomic environment. As life insurers, pension providers and other stakeholders grapple with an uncertain set of economic and demographic challenges, offshoring has come of age as an essential tool in the risk financing toolset, helping absorb some of the volatility within the sector.