As US companies falter under mounting debt, life insurers’ increasing reliance on illiquid assets and offshore reinsurance raises concerns over the stability of retirement savings for millions amid potential systemic risks.
The expanding wave of credit defaults among US companies, from subprime auto lender Tricolor Holdings to Broadband Telecom Inc., raises a pressing concern for American retirees: if more firms collapse under unsustainable debt levels, who ultimately shoulders the losses? Increasingly, the answer appears to be the policyholders of US life insurers, who rely on these firms to safeguard and grow their retirement savings.
Life insurers manage trillions of dollars in assets, committed to providing stable income streams when policyholders reach old age. Traditionally, these institutions invested conservatively in high-quality, liquid bonds to ensure dependable payouts with minimal risk. However, industry shifts driven by large investment firms have altered this approach. Recognising the long duration of liabilities, insurers have sought higher returns by allocating a growing share of their portfolios to less liquid, higher-yielding assets such as real estate debt and loans to smaller companies. By 2023, illiquid assets accounted for more than $2.5 trillion, roughly 37% of total investments, an increase from 31% a decade earlier and exceeding pre-2008 crisis levels.
This strategic shift aims to enhance profits but carries significant hidden risks. Illiquid assets are difficult to value and often rely on private, non-transparent ratings. Investment frequently involves complex structures including business development companies that hold tranches of securities backed by loans to operating businesses. Layers of leverage used within these chains amplify the risk of default just as insurers’ own equity buffers have thinned to their lowest point in two decades. This fragility is problematic because it increases the potential for unexpected losses that could jeopardise insurers’ ability to meet their obligations.
Despite the rise in illiquid exposures, US life insurers maintain substantial holdings in safer instruments. According to recent data, they held almost $131 billion in US Treasury securities at the end of 2022, underscoring a degree of ongoing prudence amid the hunt for yield. Overall, 95% of the general account bond portfolios remain investment grade, with defaults near negligible levels according to industry statistics from 2023.
Another factor adding complexity and risk is the growing reliance on reinsurance, especially offshore. US life insurers ceded $2.4 trillion in reserves to reinsurers by 2024, up from $2 trillion the year prior. Much of this reinsurance capacity, around 38% of total ceded reserves, now resides with Bermuda-based firms, with Bermuda alone accounting for 84% of US life and annuity liabilities transferred offshore. This proliferation of offshore reinsurance arrangements introduces additional layers of counterparty and jurisdictional risk, further complicating regulators’ oversight efforts.
Industry reports further highlight the increasing role of private credit and alternative assets within life insurers’ portfolios. As of year-end 2024, privately placed bonds comprised 45.6% of total bond holdings, with private-label residential mortgage-backed securities (RMBS) among the fastest-growing segments. The challenge lies in the valuation and risk assessment of these private assets, which remain opaque and difficult to mark to market, especially during times of financial stress.
The Federal Insurance Office’s 2025 Annual Report has emphasised these evolving risks, noting the urgent need for improved regulatory frameworks to adequately monitor and manage exposures related to private credit and offshore reinsurance. Critics warn that absent robust oversight, many US retirees could face the consequences of a systemic credit hazard that lurks quietly within their life insurance contracts.
In summary, while US life insurers continue to provide essential retirement income guarantees, their growing tilt towards illiquid, leveraged, and privately rated assets, combined with increased offshore reinsurance reliance, raises warnings about heightened financial vulnerability. Regulators must act decisively to better comprehend and mitigate these risks, ensuring that the retirement funds upon which millions depend remain secure in an increasingly complex credit environment.
- https://www.advisorperspectives.com/articles/2025/11/19/credit-hazard-lurking-retirement-funds?utm_source=articles_feed&utm_medium=rss&utm_campaign=item_link – Please view link – unable to able to access data
- https://www.spglobal.com/market-intelligence/en/news-insights/articles/2023/5/us-insurers-8217-exposure-to-treasurys-tops-300-billion-75992974 – This article discusses the exposure of US insurers to US Treasury debt, highlighting that property and casualty insurers reported holdings of $148.49 billion at year-end 2022, while life insurers held almost $131 billion in US Treasurys. It also notes that health insurers reported about $25 billion in various debt instruments issued by the Treasury. The article provides insights into the investment strategies of different types of insurers and their holdings in US Treasury securities.
- https://www.insurancejournal.com/news/international/2025/07/16/831084.htm – This article examines the growth of US life reinsurance, driven by insurers seeking growth and capital optimization. It notes that US life insurers’ reserves ceded increased to $2.4 trillion in 2024, up from $2.0 trillion in 2023. The article also discusses strategic partnerships between re/insurers and alternative investment managers, the use of offshore platforms, and the record year of annuity sales leading to continued reinsurance growth in the US in 2024.
- https://www.acli.com/-/media/public/pdf/news-and-analysis/publications-and-research/2024-fact-book/pub_02fb24_chapter_02_assets.pdf – This chapter from the 2024 ACLI Fact Book provides detailed statistics on the assets held by life insurers. It reports that at year-end 2023, 95% of total general account bonds were investment grade, with only 0.1% in or near default. It also notes that life insurer holdings of corporate stock rose 9.6% between 2022 and 2023 to $2.3 trillion, accounting for 26% of total assets.
- https://home.treasury.gov/system/files/311/Final%20FIO%202025%20Annual%20Report.pdf – The 2025 Annual Report on the Insurance Industry by the Federal Insurance Office discusses the increasing reliance of life insurers on private credit and alternative assets. It highlights that privately placed bonds accounted for 45.6% of total bond holdings at year-end 2024, and that private-label RMBS saw the fastest growth of L&H bond holdings in 2024, with year-over-year growth of over 20%. The report also addresses the challenges in valuing private assets and the associated risks.
- https://www.insurancebusinessmag.com/reinsurance/news/breaking-news/us-life-insurers-ramp-up-offshore-reinsurance-amid-profit-surge–moodys-557085.aspx – This article reports on the increasing reliance of US life insurers on offshore reinsurance, particularly in Bermuda. It notes that by the end of 2024, US life insurers had ceded 38% of their total $2.4 trillion in reserves to Bermuda-based reinsurers, up from 26% in 2020. The article also discusses the influx of capital into Bermuda’s reinsurance sector and the establishment of new reinsurers like FCA Re.
- https://www.insurancebusinessmag.com/reinsurance/news/breaking-news/offshore-reinsurance-tops-1-trillion-for-us-life-sector-536426.aspx – This article discusses the trend of US life insurers transferring liabilities to offshore reinsurers, with over $1 trillion in liabilities shifted by the end of 2024. It highlights that Bermuda accounts for 84% of all US life and annuity reserves ceded to non-US jurisdictions, underscoring its dominance as the preferred offshore destination for the sector. The article also mentions the increased activity in other jurisdictions like the Cayman Islands and Barbados.
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The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The narrative appears to be original, with no substantially similar content found online. The earliest known publication date of similar content is from 2020, which is over five years prior. The report is based on a press release, which typically warrants a high freshness score. No discrepancies in figures, dates, or quotes were identified. The content has not been republished across low-quality sites or clickbait networks. The report includes updated data, justifying a higher freshness score.
Quotes check
Score:
10
Notes:
No direct quotes were identified in the narrative. The content appears to be original or exclusive.
Source reliability
Score:
9
Notes:
The narrative originates from Advisor Perspectives, a reputable organisation known for its financial insights. This adds credibility to the report.
Plausability check
Score:
8
Notes:
The claims made in the narrative are plausible and align with known industry trends. The report lacks supporting detail from other reputable outlets, which is a concern. The tone and language are consistent with the region and topic. No excessive or off-topic details were noted. The tone is formal and appropriate for a financial report.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative is original, with no substantially similar content found online. It originates from a reputable organisation, Advisor Perspectives, enhancing its credibility. The claims made are plausible and align with known industry trends. While the report lacks supporting detail from other reputable outlets, the absence of direct quotes and the formal tone suggest a high level of professionalism. Therefore, the overall assessment is a PASS with high confidence.