US life insurers have moved around $800 billion in reserves offshore from 2019 to 2024, targeting places like Bermuda and the Cayman Islands to tap into private credit growth, according to Moody's.\n\nWhat does this mean?\n\nWith near-zero interest rates driving a competitive push, US life insurers partnered with private equity and alternative asset managers, despite rising interest rates. About $75 billion in mergers occurred from 2019 to 2024, including Allstate's $2.8 billion sale to Blackstone in 2021 and Brookfield Reinsurance's $5.1 billion purchase of American National in 2022. By moving funds offshore, insurers freed up capital, enabling attractive pricing and boosting annuity returns. While portfolios are still largely fixed income, by the end of 2024, one-third is linked to private credit, signaling a strategic pivot.\n\nWhy should I care?\n\nFor markets: Tracking new trends in insurance.\n\nThe move toward private credit is a big shift, with US life insurers holding $6 trillion in cash and invested assets by 2024. This change offers new opportunities in fund finance, providing credit to alternative asset managers. But Moody's cautions that the opaque nature of private credit structures makes them hard to value, and their illiquidity could be risky if downsizing is needed.\n\nThe bigger picture: Financial landscapes evolve.\n\nThe global financial scene is transforming as US life insurers adopt private credit and offshore strategies. This is part of a trend where traditional insurance merges with innovative private equity practices. It reflects a broader narrative of adapting to economic changes - a savvy move by insurers to mitigate risk and maximize growth potential while navigating regulatory and market uncertainties.

US Life Insurers Move Billions Offshore While Embracing Private Credit

US life insurers have moved $800 billion in reserves offshore from 2019 to 2024, targeting Bermuda and the Cayman Islands to capitalize on private credit growth. This shift, driven by near-zero interest rates and rising rates, involves partnerships with private equity firms and alternative asset managers. Key M&A deals include Allstate's $2.8 billion sale to Blackstone in 2021 and Brookfield Reinsurance's $5.1 billion purchase of American National in 2022. By 2024, one-third of portfolios are linked to private credit, though Moody's warns of risks related to opacity and illiquidity.