Enhancing Investment Returns: The Rise of Asset-Intensive Reinsurance

Increasing Focus on Asset-Intensive Reinsurance

Insurance companies are increasingly adopting asset-intensive reinsurance strategies to enhance investment returns and optimize capital allocation, according to PwC's latest findings. This strategy involves transferring both asset and insurance risks to reinsurers, primarily targeting long-term life and annuity products to maximize profitability and regulatory compliance.

Market Dynamics and Growth

The last decade has witnessed significant developments driving this trend, including the transition from public to private ownership among insurers and the rise of hybrid entities bridging asset management and reinsurance. Additionally, the expanding role of private credit markets has become increasingly prominent in the insurance industry.

AM Best data shows that the reinsurance leverage ratio for the U.S. life and annuity sector soared to 328% by the end of 2024, marking a notable increase from about 200% a decade earlier. S&P research further highlights that U.S. life insurers transferred over US$2.4 trillion in reserves to reinsurers by the end of 2024, with US$130 billion in liabilities ceded that year alone. Between 2018 and 2023, these firms ceded over US$600 billion, significantly reducing liabilities through effective risk management.

Significant Transactions and Market Expansion

Several major transactions illustrate the insurance industry's dynamic expansion. In 2025, Venerable concluded a deal with Corebridge, elevating its managed assets under risk to US$118 billion—a 77% increase. MetLife partnered with Talcott Resolution to reinsure approximately US$10 billion in U.S. variable annuity and rider reserves, while Resolution Life transferred US$9.7 billion in reserves from Protective Life. President Moses Ojeisekhoba highlighted these developments, underscoring the rapid consolidation progress in the global life and annuity space.

According to PwC, reinsurance agreements have evolved to include universal life with secondary guarantees, long-term care, disability income, and variable annuities. This development prompts asset-intensive reinsurers to collaborate with traditional reinsurance companies, managing investment and liquidity risks while traditional players handle insurance risks. Flow reinsurance transactions, involving ongoing reinsurance of new policies, are on the rise, providing steady capacity for cedants and offering reinsurers faster execution and reduced costs.

Regional and Competitive Trends

The U.S. remains the leading market for asset-intensive reinsurance; however, notable transaction growth is occurring in Japan, with increasing activity in South Korea, Hong Kong, and Singapore. New market participants, facilitated by asset manager-reinsurer partnerships, are intensifying competition in the insurance sector. AM Best reported a tripling of companies utilizing sidecar vehicles since 2021, with ceded reserves to these vehicles growing threefold over two years.

A 2022 report from Boston Consulting Group revealed that private equity-backed reinsurers captured 43.3% of total reserve credits on new transactions. The Bermuda Monetary Authority reported a global retirement income protection gap of US$51 trillion as of 2023, emphasizing the pressing need for strategic underwriting and claims management practices.

Key Factors for Success

PwC identified origination, transaction structuring, pricing, and access to capital as critical factors distinguishing successful participants in this increasingly competitive market. With a focus on regulatory compliance requirements and strategic payer-provider collaborations, industry leaders are well-positioned to navigate these complex dynamics successfully.