Life reinsurance market faces offshore annuity surge

Asset managers are backing new entrants focused on legacy blocks

The global life reinsurance market may face uncertainty from the rapid growth of offshore annuity reinsurers, which have attracted new capital from asset managers and are focused on asset-intensive reinsurance and legacy annuity block transactions, AM Best warned.

The new players bring varying business models, capital strength and risk management practices, and have increased regulatory attention on these structures. 

The agency also pointed to the potential for economic disruption linked to the development of artificial intelligence as another emerging risk factor for the sector.

However, its overall outlook was pegged stable, citing the presence of highly rated, well-capitalised and diversified players, improving mortality trends, and strong liquidity and risk-adjusted capital positions across the segment.

The rating agency said the market remains dominated by a small number of large global reinsurers that control most of the business. 

These firms benefit from long-standing client relationships, scale, and established technical and risk management capabilities, which continue to create high barriers to entry. 

Life reinsurance accounts for a significant share of their gross premiums written, with the United States remaining the largest market. 

Most of these groups are also diversified into non-life reinsurance and maintain strong capital and liquidity profiles.

AM Best noted that excess mortality from COVID-19 has fallen close to pre-pandemic levels. 
 

eported COVID deaths are now less than one-tenth of one percent of the peak seen in 2021. 

The disease dropped out of the top ten causes of death in 2024, after ranking tenth in 2023 and fourth in 2022. 

Reinsurers have said they are comfortable again using mortality improvement assumptions in their pricing.