U.S. life insurers moved nearly $800 billion in reserves to offshore affiliates between 2019 and 2024, reflecting a shift driven by the growth of private credit in the sector, according to a Moody’s Ratings report.
As interest rates fell to near zero from 2015 to early 2020, public life insurers adopted multiple strategies to maximize returns and stay competitive with private credit firms, including partnering and merging with private equity and alternative asset managers. This trend has continued despite higher interest rates.
Between 2019 and 2024, roughly $75 billion worth of life insurer-private equity mergers and acquisitions occurred. Notable deals included Allstate’s 2021 sale of its life and annuity businesses, now known as Everlake, to entities managed by Blackstone for $2.8 billion, and Brookfield Reinsurance’s 2022 acquisition of American National for $5.1 billion.
The movement of billions of dollars from U.S. businesses into offshore accounts in Bermuda and the Cayman Islands has accelerated as insurers seek to free up capital to support growth, offer more competitive pricing and returns on products like annuities, and pursue shareholder-friendly activities such as share repurchases.
At the end of 2024, the U.S. life insurance industry held about $6 trillion in cash and invested assets, with an estimated one-third allocated to private credit. Life insurers have been gradually increasing the share of private credit in their portfolios, especially in fund finance, credit extended to alternative asset managers to capitalize their funds.
Fixed income assets such as corporate bonds and commercial real estate remain the largest part of insurers’ portfolios, but fund finance is expected to grow over the next three to five years, according to Moody’s.
The report highlighted several risks associated with this evolving business model. Private credit assets lack transparency in their details and structure, making them difficult to value. Their illiquid nature also poses risks in a downside scenario if companies are forced to liquidate these investments.
