News
Alternative Assets · Bermuda · Life Insurance · Private Credit
US life insurers, in response to persistently low interest rates post-financial crisis, have fundamentally transformed their business model by partnering with alternative asset managers, shedding unprofitable businesses, and moving nearly $800 billion in reserves offshore to affiliates, primarily in Bermuda, as reported by Moody's Ratings.
This strategic pivot, which began with a few firms, now encompasses the entire industry, driven by the search for better investment returns than public fixed income offered. Partnerships with alternative asset managers have surged over 70% since 2018 among Moody's-rated life insurers, boosting yields and competitiveness, with specialized managers now overseeing 10% or more of some insurers' portfolios.
Public life insurers have also offloaded capital-intensive, non-core businesses, such as fixed annuities, to achieve leaner models, a move rewarded by investors with higher valuations for "capital-light" companies. The transfer of life reinsurance reserves to offshore jurisdictions like Bermuda and the Cayman Islands has grown 15% annually since 2019, reaching approximately $800 billion at year-end 2024, enabling insurers like Athene and Global Atlantic to optimize capital, support growth, and pursue shareholder-friendly activities.
While this new business model thrives, Moody's Ratings identifies two main risks: asset risk due to the lack of transparency and illiquidity of private assets, and counterparty risk stemming from reliance on third-party reinsurers and the quality of capital in offshore affiliates.
