NAIC explores stricter capital rules for some offshore life reinsurance deals

Scott White, president of the National Association of Insurance Commissioners, told delegates at the Bermuda International Life & Annuity Conference in Hamilton this week that US insurance regulators are exploring whether to strengthen the capital requirements attached to some offshore life reinsurance deals. The risk he named is recapture: if a reinsurer offshore cannot meet its obligations, the US insurer that ceded the liabilities would have to take them back onto its own balance sheet.

Bermuda's own supervisors have been writing rules for that failure case, and the BMA's September consultation on a resolution regime names who would run a failed insurer and which firms fall inside the perimeter, then defers the powers that decide who actually gets paid.

Which transactions fall inside the NAIC's review turns on a distinction White drew explicitly. He tied the exploration to deals with non-reciprocal reinsurers, saying some of those have shown larger reserve reductions and can create more strain if recapture is ever needed, and said the association is weighing whether its capital requirements should better reflect both that recapture risk and the higher credit risk of reinsurers with weaker financial strength. The coverage does not identify which jurisdictions the NAIC counts as non-reciprocal.

Bermuda holds recognition of regulatory equivalence from the NAIC, while Cayman, which has emerged as a competitor for the same business, is seeking the same status. The association has already moved along that line: a memo from its September national meeting instructed the Life Risk-Based Capital Working Group to develop a capital charge for cessions outside reciprocal jurisdictions, putting the Cayman gap into the capital formula and converting Bermuda's earned recognition into a capital advantage. White's remarks supply a president's voice for that perimeter, with no schedule attached.

Add this to the private-credit letter to Senator Warren and the pattern becomes clear. The association is moving from reviewing private credit to pricing it on ceded books, and recapture risk is the next thing to be priced, a higher charge that would show up in the US general accounts that ceded the liabilities.

The two books that line sorts are far apart: Bermuda leads the offshore life reinsurance market, with total assets across its long-term insurance sector above $1.5 trillion, while Cayman's life and annuities sector held about $101 billion at the end of 2025.

White's account of how the market arrived here explains why capital rules are the lever regulators reach for and why the wording of the review is careful. Years of low interest rates pushed life insurers beyond traditional publicly traded bonds into private credit, structured securities and investments involving affiliated companies, and offshore reinsurance, Bermuda's included, helped them carry large volumes of long-term liabilities, he said. He treated the benefits as real—insurers are well placed to hold less liquid assets for long periods, offshore markets supplied capital and diversification—but those same shifts made the risk harder to see.

Two visibility problems drew his attention: supervisors can have limited sight of the assets supporting liabilities transferred to a reinsurer offshore, and private credit ratings do not always reveal their underlying assumptions, which leaves valuations resting on inputs that are difficult to observe. White said the NAIC is also strengthening its oversight of private-credit investments, a growing part of life reinsurers' portfolios and a source of concern for some regulators.

That thread has a record of its own: the NAIC's letter to Senator Warren framed ratings and valuation reviews across a $1.2 trillion private-credit perimeter, and this publication reported in September that the exercise reaches Bermuda's reinsurance book directly, with the cost of holding private credit on a ceded book set by how those reviews land.

His wider subject was pace: investment strategies, cyberthreats and artificial intelligence are all moving faster than supervision, he said, describing regulators as navigating rapid, unpredictable change. A tighter charge on a cession would narrow the capital relief the transaction was built to produce, which is the arithmetic underneath the concern he put on the table.

None of it is text yet: the coverage has White exploring whether to strengthen the requirements, with no draft, no effective date and no adoption calendar, the ordinary condition of an idea aired at a conference. The procedural question is where it would land, since a charge aimed at recapture risk and reinsurer credit strength implies a change to the risk-based capital formula, and the working group already assigned to reciprocal-jurisdiction cessions is a likely venue, though the coverage names no committee and no timeline for this piece of the work.

For Bermuda, the boundary matters more than the direction: if the strengthened requirements attach only to reinsurers outside reciprocal jurisdictions, the island's equivalence keeps its cessions where they are and the charge falls on Cayman's growth instead. If the NAIC decides that recapture risk and credit strength should be priced wherever the reinsurer sits, then the $1.5 trillion long-term book is what the change measures. White's verb was exploring; the RBC blanks will show whether it becomes more.