Thanks to a financier in America who shares a different attitude to insurance and its regulation with us, it would be interesting if not vital were it not about insurers and reinsurers who will end up paying our wage in retirement.
This is the question being asked in the USA now that one of its annuity providers has gone bust
What happens when a foundational promise of the retirement security system is broken? The collapse of PHL Variable Life Insurance Co. is a stark, unsettling answer. For policyholders depending on guaranteed retirement income, it is a cautionary tale about what can go wrong when an insurer loses its financial footing — and when the system designed to catch it looks the other way.
Here is a commentary from an American
His commentary extends to the American insurer’s propensity to export liabilities and assets to Bermuda
The reality of the American insurance system is that it is different to us. It takes risk and deals with it differently to us. The way that risk is being dealt with is changing. The Americans can deal with fluid risk taking with their life insurance and can deal with failure of an annuity provider with equanimity.
We assume that they are the same as us, but the American insurance and reinsurance system is different and it’s changing. We would not accept the following statement that concludes the Royal Gazette’s article.
“Recent regulatory developments in both Bermuda and the United States are expected to influence the future direction of the market. Regulatory initiatives have included enhanced liquidity testing, expanded reporting requirements, reserve adequacy reviews, and increased scrutiny of sidecar structures and affiliated transactions.”
In addition to Bermuda, the report notes growing interest in the Cayman Islands as an alternative jurisdiction for life and annuity reinsurance activity.
Several new reinsurers and strategic partnerships have emerged in recent years, though Bermuda continues to maintain a leading position within the market.
The report concludes that reinsurance has become a core component of risk and capital management strategies for many US life insurers.
“Industry activity has been driven by both affiliated and third-party transactions covering annuities, life insurance, pension risk transfer business, structured settlements, and legacy insurance blocks.”
The report also identifies substantial growth in newly established Bermuda reinsurers and sidecar structures.
Since 2017, recently formed Bermuda reinsurance entities have accumulated nearly $355 billion of assumed reserves, representing a significant portion of the market’s overall expansion.
“During 2025 alone, US life insurers completed more than $73 billion of new Bermuda reinsurance transactions,” the report said.
“The ten largest transactions accounted for approximately $60 billion of that total and included a mix of affiliated transactions, third-party reinsurance arrangements, and sidecar structures supported by outside investors.
“The analysis highlights several factors contributing to the continued use of Bermuda reinsurance, including capital management flexibility, support for new business growth, management of legacy blocks of business, and access to third-party capital.
“At the same time, the report notes ongoing industry and regulatory focus on reserve adequacy, investment portfolio composition, counterparty risk and affiliated transactions.
“Recent regulatory developments in both Bermuda and the United States are expected to influence the future direction of the market. Regulatory initiatives have included enhanced liquidity testing, expanded reporting requirements, reserve adequacy reviews, and increased scrutiny of sidecar structures and affiliated transactions.”
In addition to Bermuda, the report notes growing interest in the Cayman Islands as an alternative jurisdiction for life and annuity reinsurance activity.
Several new reinsurers and strategic partnerships have emerged in recent years, though Bermuda continues to maintain a leading position within the market.
The report concludes that reinsurance has become a core component of risk and capital management strategies for many US life insurers.
It said: “As the market continues to evolve, insurers, regulators, and other stakeholders are expected to remain focused on balancing capital efficiency, financial strength, and policyholder protection.”
This is not what we do in Britain, it is fundamentally different. But we are outsourcing our pensions to America where an annuity provider has just gone bust. This is a matter of fact.
If you are reading this as someone with a DB pension about to start or in payment , these articles, shared with us by Arthur Fliegelman deserve your attention.
Hello Henry,
Has your Annuity etc
I have waited until today to reply to this in order to see what other comments have been submitted on, what I believe, is an important situation. Surprisingly, like your previous alert on this subject, there has been none. I write as someone who is relying on their Annuity with Just.
Reference your blog’s first link, which is the real importance i.e. the American here is ‘a former Insurance Commissioner for the State of Connecticut’ and (as you will have also seen) it is an article in the USA industry trade journal one month back. NYT has recently been saying the same. I don’t know what the equivalent trade journal in the UK is but I haven’t noticed any reference from you to it.
As I see it, Mr Leonardi’s simplified point was ‘…the Cayman Islands’ reinsurance regulatory system is defined by permissive capital standards and a troubling lack of transparency. This combination has proven to be a powerful draw’. He later urges ‘that is why state regulators must act now, before a larger crisis forces their hand’. Ending with ‘…obligation belongs to the insurers who write the contracts — and just as much to the regulators who stand behind them’.
Given your summary of the (Bermuda) Royal Gazette article, is it a different situation for the UK pension industry if/when taken over by US interests and outsourced?
Kind regards,
Tim Simpson