Overview
Life reinsurers based in Bermuda have recorded increased activity as annuity sales rise in the U.S. and recent regulatory changes in Japan simplify cross-border business, according to AM Best.
Despite the year-over-year decline, these products accounted for nearly 38% of the overall market and continue to contribute significantly to industry growth.
Sales rose 35% compared to the fourth quarter, primarily due to strong performance in March.
Kuvare Life Re, a Bermuda-based reinsurer, expanded its total assets to $6.18bn, up from $4.12bn the previous year.
Kevin Hovi, president of Kuvare Life Re, attributed the growth to rising interest rates following a prolonged period of near-zero yields. He noted that demand for retirement products continues to grow, and reinsuring these through offshore entities can offer operational advantages.
We’ve seen in the last few years that the retail annuity market has grown incredibly as interest rates rose because people got used to cash yields at or near zero percent
Kevin Hovi, president of Bermuda-domiciled at Kuvare Life Re
“People need retirement products, and in some cases, in can be helpful to reinsure them to offshore carriers,” said Kevin Hovi.
U.S. life and annuity reserves
The proportion of U.S. life and annuity reserves ceded to reinsurers reached 56% of all issued reserves since 2019, nearly double the level in 2016. In 2023, 47% of these reserves were ceded offshore, compared to 26% in 2016.
Bermuda accounted for over 60% of new business and more than a third of all in-force business, according to a Best’s Special Report.
- U.S. individual life insurance premiums are expected to reach $16 bn in 2024, marking the fourth consecutive year of record-high new premiums.
- Rising equity markets, low inflation, and reduced unemployment continue to support growth in life insurance and annuity sales.
- Despite challenges from high interest rates, whole life (WL) and term life sales are forecasted to grow by 1%-5% in 2025 as market conditions stabilize.
- Variable universal life (VUL) is set to grow 12%-16% in 2024, driven by equity market gains, while indexed universal life (IUL) growth is bolstered by simplified products with low face amounts.
- Retail annuity sales are projected to exceed $430 bn in 2024, reflecting a 10%-15% increase over 2023, despite expected declines in 2025 due to falling interest rates.
Following solid third quarter results and strong preliminary October sales figures, LIMRA expects 2024 will mark the fourth year of record-high new premium collected for the industry. Barring an unforeseen economic downturn, LIMRA is forecasting life sales to grow in 2025.
The report also noted that around two-thirds of offshore reserve transfers went to affiliated entities. Insurers that ceded more than half of their total ceded reserves were typically owned by private equity firms, asset managers, or global reinsurers.
The 10 largest reinsurance transactions in 2024 involved $103.2bn in ceded reserves, with $96.8bn directed to offshore reinsurers.
U.S. annuity sales surged to $105.4bn in Q1 2025, approaching record levels amid economic uncertainty. LIMRA’s data shows sales remained above $100bn for six consecutive quarters, with the current figure just 1% below the all-time high in Q1 2024.
Type of reinsurance deals
Hovi observed a shift in the type of reinsurance deals over recent years. Before 2020, most transactions involved legacy blocks. Over time, business shifted toward flow transactions, which cover newly issued policies.
Kuvare focuses primarily on flow arrangements, with block business becoming rare. Some carriers lacking investment scale or capital now seek to reinsure a portion of their new business with Bermuda reinsurers.
I’d say up until 2020, a lot of the Bermuda market was from legacy blocks. There wasn’t as much new flow business coming to Bermuda.
“It’s morphed into a combination of block and flow deals. In certain cases, companies that don’t have the investment expertise, capital or size to be competitive in the market will call up a Bermuda reinsurer and say we’d like to reinsure half our new business to you,” he said.
In April 2024, Blue Owl Capital acquired Kuvare Insurance Services in a $750mn deal involving cash and stock, and invested an additional $250mn in preferred equity in Kuvare’s parent company.
Bermuda reinsurers’ underwriting profitability is likely peaking at current levels, as price increases moderate and loss-cost inflation persists, according to Fitch Ratings.
Returns will continue to be favorable as market conditions remain attractive, with the negative effect of natural disasters on catastrophe claims reflected in pricing in 2024.
For Bermuda-based (re)insurers predicts the meaningful underwriting improvement seen in 2023 will be limited in 2024 as premium rate increases decelerate.
The hardening market continued at the reinsurance renewal, with flat to up in most lines as the supply/demand imbalance narrowed, supported by relatively limited new capacity entering the market and deteriorating loss-cost trends from social inflation.
Reinsurance for traditional life policies
The U.S. annuity sector entered 2025 with positive momentum, although upcoming economic challenges remain a possibility. An Best’s Market Segment Report highlighted the use of offshore reinsurance as a strategy to reduce capital charges related to risk assets.
While reinsurance for traditional life policies remains relatively unchanged, annuity reinsurance has grown substantially.
Edward Kohlberg, director at AM Best, said the volume increase remains significant. Stephen Vincent, associate director, added that the market still offers substantial capacity and remains attractive to new participants due to continued growth in retirement needs and geographic diversification.
Danish Iqbal, CEO of Somerset Re, cited repeat business and support from its parent, Aquarian Holdings, as key advantages. He stated that building on established client relationships remains a priority, though the firm also aims to attract new partners.
We’ve had numerous transactions at Somerset Re that have been with the same clients and we find that’s where we’ve been more successful
Danish Iqbal, CEO of Somerset Re
“We’re more often looking toward existing clients and new opportunities with them. But it’s always easier to strengthen relationships with clients when you can show them what you’ve done,” Iqbal said.
Bermuda and the Cayman Islands gained reinsurance traction
Bermuda and the Cayman Islands have gained traction due to their regulatory stability and availability of professional services.
Cayman reinsurers, according to the report, insure predominantly North American risks, with 90% of exposure based in that region.
Japanese insurers have sought reinsurance partnerships due to limited domestic investment options.
Hovi explained that with Japanese carriers largely restricted to government bonds, partnering with offshore reinsurers like those in Bermuda allows access to higher-yield credit markets, enabling more competitive annuity offerings.
Volatility in financial markets, according to Hovi, can create opportunities for annuity providers by increasing demand for fixed income products. He noted that consumers tend to shift away from equities during uncertain periods, viewing annuities as safer alternatives.
In some ways, volatility benefits annuity products because consumers steer away from perceived risks—people will say they’re done with equities and prefer to purchase a safer product, and an annuity is an attractive option,
However, he acknowledged that the long-term impact of tariff-related volatility on market behavior remains uncertain.
FAQ
Demand has risen due to growing U.S. annuity sales and regulatory shifts in Japan that facilitate cross-border insurance transactions.
Rising interest rates, economic uncertainty, and declining confidence in equities have contributed to a stronger demand for retirement-focused financial products.
47% of reserves were ceded offshore, nearly doubling from 26% in 2016.
Flow reinsurance transactions—covering newly issued policies—have become more common than legacy block deals, especially among reinsurers like Kuvare.
Japanese insurers, limited by domestic investment constraints, use Bermuda reinsurers to access higher-yield U.S. credit markets for annuity offerings.
Volatility is pushing consumers toward fixed income products, making annuities more appealing as a perceived lower-risk alternative to equities.
Their appeal lies in stable regulatory environments, access to legal and financial expertise, and flexibility in accounting frameworks.
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QUOTTES: Kevin Hovi – president of Bermuda-domiciled at Kuvare Life Re, Edward Kohlberg – director at AM Best, Danish Iqbal – CEO of Somerset Re
