US life insurers’ growth in offshore reinsurance vehicles to persist

Written by Adam Cadle

02/01/2025

The trend of US life insurers partnering with alternative investment managers (AIM) via offshore sidecars and reinsurance platforms will persist, with positive and negative credit implications for rated issues, Fitch Ratings has said.

Fitch said offshore reinsurance vehicles can provide additional risk capital, which can allow insurers to originate and/or acquire larger volumes of business while helping to manage their capital requirements more efficiently and potentially improve financial leverage.

The vehicles can also increase underwriting capacity and improve diversification by enabling insurers to share risks with investors, potentially reducing the overall risk exposure.

However, insurers may establish sidecars to drive above-average growth, Fitch added.

“These vehicles also introduce counterparty credit risk and potential regulatory scrutiny, which could negatively affect an insurer's financial stability if the vehicle underperforms. Offshore structures can also increase compliance costs while raising operational complexities, which could pressure profitability and investment returns.”

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