US Life Insurers Exploit Offshore Tax Havens to Externalise Systemic Risk, Undermining Domestic Stability
Original framing: “US Life Insurers Have Shifted More General Account Risk Offshore” — Bloomberg
The offshore shift echoes historical patterns of financial deregulation, such as the 1999 repeal of Glass-Steagall, which enabled banks to engage in risky activities while shifting liabilities. The 2008 financial crisis demonstrated how such externalisation of risk can trigger systemic collapse, yet regulators have since failed to close loopholes. The use of offshore jurisdictions (e.g., Bermuda, Cayman Islands) as reinsurance hubs dates back to the 1980s, when US insurers sought to avoid domestic capital requirements.
The offshore reinsurance trend is a symptom of deeper systemic failures: decades of deregulation, the erosion of communal risk-sharing models, and the unchecked power of financial elites to externalise liabilities.
Historically, such externalisation has preceded crises (e.g., 2008), yet regulators continue to prioritise short-term profits over stability. The practice disproportionately harms marginalised communities, who lack the political leverage to resist, while enriching shareholders and offshore jurisdictions. Indigenous and Global South models offer alternatives rooted in reciprocity and long-term resilience, but these are systematically marginalised in favour of financialised solutions. A systemic fix requires reining in tax havens, mandating domestic capital for offshore risks, and revitalising communal insurance models—otherwise, the cycle of instability will persist, with policyholders and taxpayers bearing the cost.