May 25th 2026|6 min read
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SINCE THE global financial crisis of 2007-09 the days of offshore finance have regularly looked numbered. In 2010 America passed the Foreign Account Tax Compliance Act (FATCA), which required foreign financial firms to disclose the assets of Americans. A year later Nicolas Sarkozy—who led both France and the G20 at the time—boldly declared that tax havens would face global ostracism. In 2016 investigative reporters unearthed the “Panama papers”, a vast cache of documents that traced hundreds of thousands of tax-dodgers. The revelations led many rich-world governments to force offshore centres to create registers of beneficial ownership and share information with other jurisdictions on pain of sanctions.
In the years since, it is Mr Sarkozy who has been ostracised after a brief spell in prison for election-finance misdeeds. Offshore financial hubs, by contrast, are on some measures more popular than ever. Between 2010 and 2024 companies’ total offshore assets grew half as fast again as world GDP, more than doubling in nominal terms to $64trn (see chart 1). By the end of last year 31% of the total outstanding stock of international corporate bonds, which firms use to raise debt outside their home countries, had been issued in offshore centres—a record, and up from a post-financial-crisis trough of 24% in 2010 (see chart 2).
Chart: The Economist
A big reason for the recent growth is that, as Jason Sharman of the University of Cambridge observes, “Secrecy was less important than people thought it was.” So were lax regulations. Andrew Morriss of Texas A&M University, another scholar of offshore finance, explains that being small and nimble, havens are in some areas simply better regulated. This makes them a magnet especially for fast-growing parts of finance such as reinsurance, private-credit funds and emerging-market wealth. It also gives them an incentive to stay off rich-world regulators’ naughty lists.
The growth of offshore reinsurance and private-markets funds is related. In recent years American life insurers, which sell annuities with a guaranteed return to American customers, have invested heavily in illiquid private assets. They have also ceded more and more of their liabilities and assets to reinsurers, which lightens their balance-sheets and allows them to sell more annuities. These illiquid assets—such as private equity, private credit, property and venture-capital bets—are often managed on the reinsurers’ behalf by Wall Street’s private-markets giants like Apollo and KKR through vehicles also domiciled offshore.
Chart: The Economist
This symbiosis between life insurers, reinsurers and private-asset managers (which these days often own or work closely with the other two) is sometimes dubbed the “Bermuda triangle”, after the Caribbean jurisdiction where it has blossomed. Bermuda is fertile ground because its regulators allow reinsurers to fund their holdings of certain types of private-asset investments with less capital than is required in America. It also allows reinsurers to use their own internal models to prove that these investments match the annuity liabilities. American and European regulators have blessed this arrangement because of Bermuda’s regulatory sophistication (Vermont copied some Bermudan ideas in designing its own rules for insurance finance, notes Mr Morriss). This has helped Bermuda become home to $1.5trn in reinsurance assets, or nearly 4% of all the entire insurance industry’s global total, and 15% of worldwide reinsurance capital.
The Cayman Islands, which in 2023 was struck off the “grey list” of offshore offenders maintained by the Financial Action Task Force, an international watchdog, also wants in on the action. Its reinsurance assets have quadrupled since 2020 to over $100bn. It has attracted lots of private-asset funds, in part thanks to a six-year-old law that brought previously unregistered funds of the sort favoured by private-asset managers under the jurisdiction of the Cayman Islands Monetary Authority. The prospect of greater oversight seems to have attracted more investors than it repelled. The number of such funds registered in the Caymans has risen from fewer than 13,000 in 2020 to nearly 18,000 (see chart 3).
Chart: The Economist
Another big source of business for the havens is the emerging world. In places without secure property rights, says Mr Sharman, “offshore is the next best thing.” Ricardo Soares de Oliveira of Sciences Po, a French university, says that though precise numbers are scarce, offshore links between Africa and Asia, in particular, are clearly rising.
Increasingly, African elites and businesses have been parking their wealth in newer financial centres closer to home, notably Dubai. Sometimes their motivation is dubious (for those smuggling gold from Africa, for instance). Often, though, they simply want a place with predictable rules, good financial infrastructure and a choice of accountants, advisers and other professionals. Henley & Partners, a consultancy, estimates that the United Arab Emirates (including Dubai) drew 9,800 migrating millionaires in 2025, more than any other jurisdiction. The war in Iran has dulled Dubai’s lustre, but not that of offshore finance more broadly.
Offshore centres are also indispensable to China. In order to gain access to foreign capital, Chinese firms have for years set up “variable-interest entities” (VIEs) in the Cayman Islands, which through a series of other vehicles have contractual rights to profits generated by a Chinese operating company. When an American stockmarket investor buys a share in a Chinese company listed in America, such as Alibaba, or a European venture capitalist backs an unlisted Chinese tech darling, like ByteDance, TikTok’s corporate parent, they are actually passing money to a Cayman VIE. Many other Chinese companies rely on offshore centres to raise billions of dollars in bonds and private credit.
To get around China’s strict capital controls, Chinese companies and business owners also reinvest profits made abroad through offshore jurisdictions. The Caymans and British Virgin Islands are popular conduits for such investments, notably in American assets. They are behind only Hong Kong (itself an offshore centre of sorts) and America itself as destinations for Chinese overseas portfolio investments. Chinese official statistics record $192bn in investments in the two offshore hubs as of June 2025, three-fifths as much as in America and almost five times more than in Britain.
Not everything is going the offshore centres’ way. American regulators worried about signs of strain in private-credit markets are paying closer attention. In April Britain set out plans to tighten capital requirements for offshore reinsurance, and Japan increased its supervision of the industry. Chinese authorities, worried about losing hold of Chinese technology, are trying to curb the use of VIEs; Moonshot AI, a buzzy Chinese tech firm, is reportedly unwinding its Cayman VIE and going public in Hong Kong instead. The war in Iran has dented the allure of Dubai.
Such developments may be temporary setbacks. But time and again offshore centres have proven themselves remarkably adaptable. It would be ironic if these products of globalisation thrive in today’s fragmenting world—but not surprising. ■