Best’s Special Report: Big Year of Growth for Life/Annuity Sidecar-Like Activity in 2025

OLDWICK, N.J.--(BUSINESS WIRE)--Strong U.S. annuity sales has led to increased formations of sidecars, with total ceded reserves to sidecars or entities engaged in sidecar-like activity increased to more than $90 billion in 2025 from $55 billion in 2023, according to a new AM Best report.

The Best’s Special Report, “Big Year of Growth for Life/Annuity Sidecar-Like Activity in 2025,” notes that the vast majority of reserves ceded are covering liabilities for indexed and fixed annuities. Individual annuities have experienced significant growth amid rising interest rates over the last few years, which has created space for additional capital to enter the reinsurance market and provide capacity as annuity writers aim to manage growth and maintain adequate capitalization. As a result of managing strong premium growth through reinsurance, the individual annuity composite has steadily seen its reinsurance leverage double since 2019. In addition, overall surplus relief of nearly 11% in 2025 was double that of the previous year. 

“Sidecars have historically been more prevalent in the property/casualty segment; however, they have become more pronounced in the life/annuity industry since 2021,” said Jason Hopper, associate director, Industry Research and Analytics, AM Best. “Many P/C sidecars have finite lives funding short-term risks with liquid assets, while reinsuring a block of fixed-indexed annuities to a sidecar, for example, could go on for decades.”

Other takeaways in this report include:

• Sidecars currently account for a range from low single digits up to over three-quarters of ceded reserves (i.e., reserve credit taken plus modified reinsurance reserves) by the ceding company, signaling more counterparty concentration at some companies. 
• Companies ceding reserves to sidecars have an outsized share of funds withheld in coinsurance compared with the industry aggregate. While sidecars account for approximately 4% of the industry reserve credit taken at primary insurers, they account for 10% of funds withheld.
• The formation of reinsurance sidecars has been confined generally to private equity/asset manager-backed insurers or insurers with investment management subsidiaries. These sidecars can earn fees for the contributing owners, providing additional revenue streams for diversification.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=366145.

For a video discussion with Hopper about the report, please visit http://www.ambest.com/v.asp?v=ambsidecars626.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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