As use of third-party capital within life annuity reinsurance structures including sidecar vehicles increases, a new estimate from reinsurance broker Guy Carpenter, as reported by rating agency AM Best, suggests around one-third of capacity is now from third-party investor sources.
The life and annuity reinsurance space has been transformed in recent years through the use of efficient third-party capital mechanisms, including a proliferation of reinsurance sidecar structures and sidecar-like reinsurers that support major underwriting groups.
While the strategy is akin to insurance-linked securities (ILS), in that third-party capital providers and investors are accessing the returns of insurance and reinsurance business through dedicated structures, in the life and annuity space it’s been more about funding for underwriting growth and an asset play.
In a new report this morning, rating agency AM Best highlights the expansive global life and annuity reinsurance space saying it is “well capitalized and positioned for robust growth due to increased dedicated capital for life reinsurance for traditional life business and more asset-intensive annuity business via third-party capital.”
After which it provides the estimate from the reinsurance broker, writing, “Guy Carpenter estimates that third-party capital accounted for around one-third of total capacity in 2025, which has doubled since 2022.”
Which drives home the increasingly important role of third-party capital structures in the life and annuity reinsurance market around the world.
In fact, this shows that third-party capital penetration into the life and annuities market has been far more rapid than in P&C reinsurance risks, where alternative or ILS capital from third-party investors remains around 18% of global dedicated reinsurance capital, according to recent data from the same pair of companies.
The global life and annuity market learned from the structural innovation that had taken place in the insurance-linked securities market, borrowing from it to develop structures that align the incentives of investors, re/insurers and asset managers.
With most structures acting as a kind of companion source of underwriting capital, a sidecar, or a rated sidecar-like reinsurer, there are also some fund structures that supply capacity to fuel life and annuity re/insurer growth as well.
In essence, these structures bring additive third-party capital to help life and annuity specialist re/insurers expand their underwriting appetites, funded by investors that benefit from returns, with those investors sometimes also asset managers for the reinsurance float, or in some cases having additional asset management partnerships in place.
The end-result is efficient, third-party sources of capital that help to fuel growth and expansion, leveraging underwriting and asset portfolios, while also taking risk off-balance-sheet at the same time (so a form of protection).
“Sidecars have also gained prominence in the L/A space,” explained Lou Silvers, senior financial analyst, AM Best. “These are reinsurance affiliated or non-affiliated entities that draw on capital from third-party limited investors and can provide incremental just-in-time capital to execute larger deals when opportunity arises and earn additional fees for the general partner.”
Third-party capital and the proliferation of life and annuity sidecars are a core factor in the expansion of this marketplace, especially offshore.
AM Best said that, “Offshore L/A reinsurance has averaged 31% annual growth over the past 10 years,” which is a dramatically higher growth rate than the more typical 4% growth rate of the pure life reinsurance market.
Ceding companies in this space are using offshore platforms as life and capital management tools, as well as for reinsurance, with Bermuda and the Cayman Islands particularly prominent, AM Best explained, saying, “These factors have been underpinned by a stable economic environment and regulatory landscape, as well as political stability, access to legal and financial talent, and flexible accounting regimes.”
New capital continues to enter the global life and annuity reinsurance market, AM Best said today.
This has been evidenced as recently as yesterday when, Wilton Re announced it has partnered with Sun Life to launch Windsor Life Re, a new U.S. and Bermuda based company that will initially act as a kind of life and annuity reinsurance sidecar for the company and is expected to deploy around US $900 million in capital.
That sidecar-like structure is similar to the recently established West Grove Re Ltd., a Bermuda based reinsurance sidecar that was launched by international life and annuity insurance specialist Talcott Financial Group. This structure was capitalised with around $1 billion, following a fundraising effort conducted in partnership with Goldman Sachs.
Other recent launches of life and annuity reinsurance sidecar type structures include, F&G launching Fort Green Reinsurance in partnership with Blackstone in August 2025, while Fortitude Re and Carlyle partnered on the launch of the Fortitude Carlyle Asia Reinsurance Ltd. (FCA Re) sidecar in October 2025.
The strategy continues to gain pace and adoption, as third-party capital sources grow in the life and annuity reinsurance space.
In the majority of cases, these are growth driving initiatives, in a market where scale and access to capital matter a lot.
However, there have been some questions raised about the more circular nature of some third-party capital structures sponsored by private equity and credit investment specialist owned re/insurers, where the investor funds ultimately support expansion of the underwriting to drive more float, that in turn finds its way into fuelling the private credit strategies operated under the same group.
Motivations differ, across sponsors of life and annuity reinsurance sidecars and third-party capital vehicles, but as a strategy this seems destined to keep becoming more important to the sector and so the opportunity for investors to derive returns from this area of re/insurance is likely to persist.
You can read all about the many reinsurance sidecar investments and transactions over the history of the ILS market, including life and annuity vehicles, by visiting our comprehensive list of collateralized reinsurance sidecars transactions.
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