Growth of Sidecars in the U.S. Reinsurance Market

The landscape of sidecars within the U.S. reinsurance market has experienced notable growth, as highlighted in a report by AM Best. Driven by surging annuity sales, the reserves ceded to sidecars exceeded $90 billion in 2025, marking a significant increase from $55 billion in 2023. These entities utilize capital from third-party investors to provide immediate financial capacity for substantial deals.

According to the AM Best report, a significant portion of the ceded reserves covers liabilities associated with indexed and fixed annuities, bolstered by rising interest rates. This trend has invited new capital into the reinsurance market, assisting annuity writers in managing growth and maintaining capital adequacy. The reliance on reinsurance has led to doubled reinsurance leverage in the individual annuity sector since 2019, with surplus relief reaching approximately 11% in 2025, twice the amount from the prior year.

Historically, sidecars were predominantly utilized in property and casualty insurance, but since 2021, they have increasingly permeated the life and annuity sectors, noted Jason Hopper from AM Best. While property/casualty sidecars typically address short-term risks, life and annuity sidecars extend over longer periods, according to AM Best's analysis.

The report highlights a concentration of activity within a few key entities, with over 75% of ceded reserves managed by Martello Re Ltd., Chariot Re Ltd., Prismic Life Re, and Skyridge Re Ltd. Notably, Martello Re and Chariot Re were instrumental in the growth observed in 2025 as recently formed entities.

Furthermore, some reinsurance arrangements initially processed via offshore intermediaries are not immediately evident in U.S. statutory filings. A notable reliance exists on funds withheld within coinsurance agreements when dealing with sidecars, a practice exceeding broader industry norms. Although sidecars account for only about 4% of total reserve credits claimed by primary insurers, they handle 10% of all withheld funds.

AM Best notes that funds withheld help reduce counterparty risks and meet regulatory or rating agency capital requirements. This strategy allows insurers to enhance their risk-based capital metrics while affiliated managers benefit from asset management fees. To date, most sidecars have been developed by insurers or reinsurers backed by private equity or asset managers, providing diversification and additional revenue through asset management activities.