The global life and health (L&H) reinsurance sector is in a period of accelerated transformation, with industry participants re-evaluating their positions between biometric risk transfer and asset-based financial strategies.
According to a recent white paper by Boston Consulting Group (BCG), reinsurers are no longer primarily viewed as providers of mortality and morbidity risk protection, but rather as potential partners in capital optimization and asset management.
The report outlines how reinsurance clients, particularly in mature markets, are demanding more from their partners than traditional risk-transfer capabilities. These clients are seeking support to improve solvency ratios, enhance investment yields, and address evolving regulatory frameworks.
BCG notes that this trend has given rise to a bifurcated market where financial solutions and asset-intensive business (AIB) arrangements are becoming central to strategic planning.
In this environment, financial solutions – bespoke capital strategies that integrate biometric and financial risk elements – are increasingly used to support product innovation and shareholder value creation.
Asset-intensive business models, meanwhile, involve reinsurers taking on both liabilities and the associated assets. These models allow primary insurers to shift capital-intensive annuity blocks off their balance sheets, transforming them into yield-generating portfolios managed by the reinsurer.
A key driver behind this shift is the increased role of private equity in the reinsurance space. Private equity-backed reinsurers are now responsible for a significant portion of life and annuity business, accounting for 43.3% of aggregate reserve credits and modified coinsurance reserves on transactions that began in 2022.
BCG emphasizes that the appeal of these strategies varies across global markets, depending in part on the maturity of each region's primary insurance sector and its social welfare infrastructure.
Bermuda has emerged as a key jurisdiction for asset-intensive reinsurance deals, with over US$50 billion in new capital flowing into its life sector since 2016. The jurisdiction’s regulatory environment and capital efficiency have made it a focal point for companies pursuing asset-driven risk transfer.
Data from BCG shows that of the US$554 billion in L&H ceded premiums in 2022, only US$120 billion – or just over 20% – was directed toward traditional reinsurers. The remaining US$434 billion flowed to captive reinsurers and private equity (PE) or PE-backed reinsurers that focus on advanced financial engineering.
However, the rise of these complex reinsurance arrangements has not gone unnoticed by regulators. Funded reinsurance structures – those in which reinsurers assume both liabilities and the associated assets – are increasingly under scrutiny due to their growing use in pension risk transfer and annuity markets.
Regulators have raised concerns about transparency, long-term risk alignment, and oversight, particularly in deals involving substantial capital movement and intercompany transactions.
The report describes the evolving marketplace as split between firms that have embedded themselves within client operations – leveraging data, technology, and flexible capital – and those that continue to offer more conventional reinsurance products with diminishing traction.
BCG concludes that while both approaches may coexist in the short term, the ability to deliver integrated risk and asset management solutions will likely determine long-term relevance in the sector.
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