Bermuda offshore holds $1.1 trillion in US annuity liabilities: BILTIR conference highlights regulatory arbitrage

At the BILTIR 2026 (Bermuda International Long Term Insurers and Reinsurers) conference in Hamilton, which gathered over 750 executives and regulators from 15 countries, data highlighted an unprecedented shift in US retirement obligations. By the end of 2025, US life and annuity insurers had ceded roughly $1.1 trillion in liabilities to Bermuda-domiciled reinsurers. This represents approximately 41% of the entire $2.7 trillion in liabilities ceded by the US market to offshore reinsurers, expanding Bermuda's long-term asset base beyond $1.5 trillion. This publication is for informational purposes, analyzing systemic dependencies through the lens of actuarial mathematics, asset-liability matching, and solvency frameworks.

Mechanics of Regulatory Arbitrage

The expansion of this offshore pipeline reflects a structural regulatory arbitrage model powered by boomer demographics. Aging populations purchasing annuities demand guaranteed income streams spanning several decades. Underwriting this long-tail business obligates primary insurers to maintain stringent regulatory capital reserves. To free up statutory balance sheets, insurers transfer liabilities and backing reserves overseas:

• Bermuda reinsurers are frequently owned by or affiliated with alternative asset managers and private equity firms (such as Apollo/Athene, Blackstone, and Aegon);
• Reinsurers allocate these reserves into high-yielding, illiquid private credit and structured finance instruments rather than traditional liquid public bonds;
• Capturing the spread between private debt returns and guaranteed policyholder payouts generated a record net income of $32.8 billion for the Bermuda life sector in 2025.

Actuarial Implications: Illiquidity and Credit Underwriting

From an actuarial perspective, the central vulnerability resides in duration and liquidity mismatches. Policyholder liabilities represent non-negotiable cash outflows stretching decades into the future. Conversely, the underlying private loans lack active secondary market liquidity, are not marked-to-market daily, and hinge upon uninterrupted borrower solvency. In the event of an economic downturn or escalating default rates, promised payout rates remain legally binding, while illiquid debt books cannot be rapidly liquidated without severe haircut realizations.

Regulatory Scrutiny and Multi-Agency Pushback

The exponential growth of non-marketable assets backing annuities has prompted regulatory pushback:

• US NAIC: The National Association of Insurance Commissioners is evaluating comprehensive capital revisions regarding reinsurance recapture rules and counterparty default exposures, targeting implementation by late 2027. This directly threatens Bermuda's reduced-collateral status;
• EIOPA (Europe): The European supervisory authority has called for intensified oversight of private-equity-backed insurers and their exposure to unrated, illiquid credit pools;
• Bermuda Monetary Authority (BMA): The domestic supervisor cautioned reinsurers to maintain strict oversight of underwriting standards, issuing direct guidance to "know their private credit."

Market Outlook and Regional Context

For actuaries and regulators across Central Asia and Kazakhstan, the Bermuda dilemma offers crucial insights into counterparty credit risk and capital relief structures. As domestic life insurers expand retirement annuity products, supervisory models overseen by the ARDFM must enforce look-through transparency regarding offshore reinsurers' underlying asset portfolios. A tightening of NAIC capital requirements in late 2027 could diminish spread arbitrage, compressing margins and increasing the cost of global reinsurance capacity across life and pension sectors worldwide.

Actuarial Conclusion: Ceding long-term guaranteed annuities against illiquid private credit structures concentrates counterparty and liquidity risks. Sound actuarial governance requires mandatory stress-testing of asset default haircuts, rigorous ALM modeling, and elevated capital charges for counterparty recapture risks in non-equivalent collateral regimes.

Source: Ainvest, 2026-10-11. Also reported: BILTIR official proceedings.