Offshore Rush: U.S. Life Insurers Funnel $800 Billion to Bermuda and Cayman Amid Private Credit Boom

  • U.S. life insurers shifted nearly $800 billion in reserves to offshore affiliates between 2019 and 2024, with Bermuda and the Cayman Islands emerging as the top destinations.

  • This unprecedented capital flight is fueled by the explosive growth of private credit, as insurers seek higher returns and greater flexibility in an era of fierce competition and fluctuating interest rates.

  • The migration of funds accelerated after interest rates plunged to near zero from 2015 to early 2020, prompting insurers to adopt aggressive strategies, including partnerships and mergers with private equity and alternative asset managers.

  • Major deals during this period included Allstate’s $2.8 billion sale of its life and annuity businesses to Blackstone-managed entities in 2021, and Brookfield Reinsurance’s $5.1 billion acquisition of American National in 2022.

  • Insurers are moving reserves offshore to free up capital, enabling them to support business growth, offer more competitive pricing and returns on annuity products, and pursue shareholder-friendly moves like stock buybacks.

  • By the end of 2024, the U.S. life insurance industry held about $6 trillion in cash and invested assets, with an estimated one-third now allocated to private credit—especially in fund finance, which provides credit to alternative asset managers.

  • While traditional assets like corporate bonds and commercial real estate still dominate portfolios, the share of private credit is expected to grow even further over the next three to five years.

  • However, this bold shift comes with risks: private credit assets are less transparent, harder to value, and more illiquid, making them riskier if insurers are forced to liquidate during market downturns.

  • The offshore surge signals a dramatic transformation in the U.S. life insurance sector, as companies chase yield and flexibility—but also face new questions about transparency and stability.

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