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Asset-intensive reinsurance (AIR), also known as funded reinsurance, attracted much commentary (and some debate) throughout 2024 and 2025.
Insurance regulators across the globe increased their attention to AIR, in recognition of mounting AIR capacity and expertise in the market (and an evident desire by insurers to avail of it).
What is the collective baseline message? An aligned one - holistic risk management.
How this evolves will impact not just insurers seeking risk/capital solutions: but also reinsurers, asset managers, investors and SPVs involved in AIR structures.
Understanding AIR
All insurers will be mindful of achieving genuine and effective risk transfer to their reinsurers.
Traditionally, reinsurance transfers only liability risk (i.e. risk of loss on liabilities underwritten by the insurer).
AIR, on the other hand, transfers both:
Typically, AIR relates to asset intensive insurance, predominantly the life and annuity sector. AIR is often employed to reduce exposure to business lines that require insurers to hold large amounts of capital (e.g. the bulk purchase annuity and pension buyout space).
AIR is typically backed by pools of assets (collateral) managed in accordance with investment management guidelines.
Risk transfer v risk creation
AIR can act as a support to diversify into new products/markets, to innovate and to grow.
Macroeconomic factors can make AIR attractive, particularly in times of economic and geo-political uncertainty.
Each component of AIR (e.g. the counterparty, the collateral/trust/similar, investment horizons and even the ‘asset’ itself) can create its own type of risk. Addressing these variables involves a balancing act which shifts depending on the precise circumstances.
How novel is AIR?
AIR is not ‘new’.
Even within the Irish (re)insurance sector, AIR has been employed for many years. This is particularly true of large, sophisticated (re)insurance groups having the experience and data to manage AIR effectively. However, relative to jurisdictions such as the US, Irish (and indeed EU/EEA) AIR activity has been limited.
What is new is the extent to which regulators across the globe are focussing on AIR, and the statements and measures issued by those regulators to respond to it.
Asset managers have been quick to recognise the opportunities: - partnering with (and, in some cases, establishing) reinsurance operations to attract investors and diversify.
Global AIR landscape
Public reports indicate that AIR is:
In the US, late 2025 saw an introduction of new asset adequacy rules for offshore AIR. This requires clear demonstration that assets would remain sufficient under stress. This is not the first AIR regulation initiative to be employed in the US. Further changes are rumoured to be on the way.
As recently as December 2025, Bermuda (home to a high number of AIR providers) has been enhancing its regulatory framework on liquidity risk management and asset/liability disclosure.
AIR in Japan was reported to be rapidly growing, in 2025.
Regulatory attitudes
Certain regulators in Europe and further afield have made their views known.
IAIS
The IAIS recently issued its Global Insurance Market Report (GIMAR) for year-end 2025.
The GIMAR examines financial stability and systemic risk factors across the insurance sector. Notably, off-balance sheet exposures arising from AIR were a focus (e.g. secondary/indirect exposures to private credit risk).
In November 2025, the IAIS published its Issues Paper on Structural Shifts in the Life Insurance Sector. That Paper identified asset recapture by cedents in AIR arrangements as a key risk.
Having spent four years monitoring the life sector, the IAIS has now called out cross-border AIR as a marked structural change. So marked, in fact, that it has reported the trend to the Financial Stability Board (FSB).
While recognising that AIR can create risks, the IAIS acknowledges its many benefits. For cedents, this incudes capital relief, risk reduction and indirect access to a broader universe of investable assets.
A zone of focus by the IAIS has been the question of disclosures regarding AIR. This includes potential expansion of ICP 20 (Insurance Core Principle 20) to increase visibility, support decision-making and allow stakeholders to evaluate affiliations/conflicts, in the context of AIR.
EIOPA
In its 2025 Financial Stability Report, EIOPA continued to point to rising AIR activity.
EIOPA has been clear: - it values reinsurance creativity.
This is an important message in a sector that requires tailored solutions to address complex risks, optimize capital, and manage emerging challenges.
EIOPA has striven for EU convergence in dealing with outwards reinsurance (including AIR). Its Supervisory Statement on reinsurance with third country reinsurers (TCRs) highlighted risks stemming from ‘non-equivalent’ reinsurance jurisdictions, noting that it would focus on innovative reinsurance arrangements. You’ll find our analysis of this statement here.
EIOPA’s opinion on the use of risk mitigation techniques warned against the potential for non-commensurate (a) risk transfer/mitigation and (b) capital relief. Material imbalances of this kind are a common theme in regulator messaging on AIR.
High cession ratios have also come under EIOPA scrutiny in recent years. Especially where there is a cession concentration to one (or a small number of) providers.
Counterparty default exposures and imperfect margining of collateral (impacting sufficiency of the buffer maintained by the reinsurer to cover loss) also found themselves in EIOPA’s spotlight.
UK – Change in the ‘AIR’?
In September 2025, the Prudential Regulation Authority (PRA) hinted that change may be on the way.
Speaking at a conference, the PRA expressed some reservation that the existing UK framework addresses AIR. Among other matters, it indicated that:
This is set against the backdrop of a growing UK focus on AIR in recent years. AIR was the subject of a PRA 2024 Supervisory Statement (updated in October 2025) focussed on bulk purchase annuities.
A life sector stress test conducted in the UK in 2025 considered the impact of AIR recapture. AIR is now a PRA priority for 2026 (with sectoral engagement expected in Q2).
Watch that space for further UK insights into disruption and resilience.
At home in Ireland…
The CBI has engaged early and proactively on AIR (ahead of most of its EEA peers).
2025 brought regular communication on AIR, via the CBI’s Insurance Newsletters. Echoing similar themes to other regulators, the CBI highlighted both:
Emphasising oversight and governance as the keystone of AIR; the CBI also cautioned of reliance which could become problematic (whether case-by-case or for the broader financial system).
To deepen its visibility on AIR activity in Ireland, the CBI embarked on a targeted data request. Issued to 11 life (re)insurers, that exercise yielded some interesting results. AIR exposure for those (re)insurers was:
The CBI expects (re)insurers to engage with it, prior to entering into material AIR transactions. Where there is a material change to a firm’s business, a formal CBI pre-notification process is required.
The CBI has made clear is that it sees AIR as a continuing area of focus.
Other EEA developments
EIOPA reports that one third of national supervisors are encountering AIR in their markets.
Some EEA regulators have taken a conservative position, despite submissions made by (re)insurance sector representative bodies (such as the Reinsurance Advisory Board of Insurance Europe).
The Dutch regulator, for example, now requires its prior consent for AIR contracts that permit asset transfers outside the EEA.
Triage Tips
Drawing together messaging from various regulators, some core expectations emerge:
For AIR counterparties (reinsurers, asset managers, custodians, SPVs, PE firms and investor structures), forward engineering with these pinch-points in mind can greatly increase competitive edge in a market with growing AIR capacity.
What information and supports can you offer to insurers to help them diligence and consider AIR proposals?
Tectonic shifts
AIR raises some interesting considerations for:
not only in relation to risks, but also opportunities.
AIR-related value flow outside the EU/EEA continues to be very significant. The majority of life (re)insurance from Irish regulated firms is reinsured with counterparties domiciled outside the EU/EEA.
Protecting against regulatory arbitrage while also maintaining competitiveness is a challenge. (Re)insurance domiciles/hubs may move strategically and compete for opportunities.
Some regulators will be guided (and constrained) by overarching legal regimes and authorities. This is especially true for EU regulators who will look to legal architecture such as Solvency II (and EIOPA guidance).
Solvency II observations
Solvency II (SII) should mean that approach to AIR is both (a) regulated and (b) flexible.
As a maximum harmonisation Directive, SII does not require regulatory approval for AIR arrangements, a point highlighted by Insurance Europe.
What is clear is that regulators expect a focussed risk approach for AIR. For EEA insurers already closely vetting (a) RMTs (risk mitigation techniques such as reinsurance) against detailed criteria and (b) investment positions against the PPP; the existing position under SII is already very robust.
Could AIR with affiliated (versus non-affiliated) counterparties be at an unfair disadvantage? SII requires additional regulatory notification/scrutiny for significant intra-group transactions. Affiliate AIR arrangements can often, however, benefit from centralised risk measurement and more streamlined approaches (e.g. to investments) due to common asset managers.
Diverse regulatory regimes also give rise to complexities for AIR arrangements. Differences in rules regarding valuations and assumptions (especially if different to SII’s risk margin approach) can have material impacts.
Final thoughts
AIR can bring many benefits. Balancing this with the risk landscape is key.
Successful AIR treads a line between regulatory rules and expectations, capital efficiency, and performance optimisation. Regulators will be on the lookout for a state of equilibrium; where those factors are properly weighed and addressed.
The AIR space is ripe for strategic partnerships/alliances (some of which have already been publicly announced).
Technology is set to be central to AIR, to maximise optimisation.
Sidecars and other investor structures commonly used in AIR can be expected to attract heightened regulatory scrutiny. Private equity (PE) is increasingly connected with the global life insurance sector and EIOPA is currently consulting on reliance on PE-owned reinsurance.
The role of governing law is also important, when framing your AIR plans.
Partnering with internal and external legal teams early, will help.
For advice or for further information on how we can support your planning and vetting of AIR arrangements, please contact Sinéad Lynch, Partner, Niall Guinan, Associate, or any other member of ALG’s Insurance & Reinsurance team.
Date published: 18 February 2026
