Photo: David Broad / Wikimedia Commons, CC BY 3.0.
If you own a guaranteed acceptance life policy from Colonial Penn, some of the money backing policies like yours may have just moved to Bermuda. No one asked you, and you probably weren’t told. That’s normal. It’s also worth understanding.
In its third-quarter earnings release filed Oct. 29, 2026, parent company CNO Financial Group said that on Oct. 1, 2026, it “closed a 3rd reinsurance transaction with CNO’s wholly owned Bermuda affiliate, reinsuring approximately $270 million of inforce graded benefit life statutory reserves from Colonial Penn.” Here’s what that means in plain English, and what it does and doesn’t change for policyholders.
What CNO actually did
Reserves are the money an insurer sets aside to pay future claims. Reinsurance is, in the words of the National Association of Insurance Commissioners, “insurance for insurance companies.” The original insurer passes some of its risk, and the reserves that go with it, to another company.
In this case, the other company isn’t a stranger. It’s CNO’s own Bermuda affiliate. So CNO is essentially moving a block of Colonial Penn’s obligations from one pocket to another, across a border with different capital rules.
The policies involved are “graded benefit” life policies. Colonial Penn’s guaranteed acceptance whole life asks no health questions and, as the company puts it, can guarantee acceptance “because of a two-year limited benefit period.” In other words, if death occurs in the first two years, the policy pays a limited benefit rather than the full amount.
This is CNO’s third deal of this kind. According to Insurance Business, the first, effective Oct. 1, 2023, moved about $6.2 billion of Bankers Life fixed indexed annuity reserves. The second, effective Oct. 1, 2025, moved $1.8 billion of Washington National supplemental health reserves.
Why insurers do this
Money. The Bermuda affiliate is regulated by the Bermuda Monetary Authority and, as Insurance Business explains, generally has to hold less capital against the same liabilities than a U.S. insurer would. The difference is freed-up capital the company can use elsewhere.
CNO has been using it. The company says it bought back $60.0 million of its own stock in the third quarter. CEO Gary C. Bhojwani said in the release, “We also executed our 3rd reinsurance transaction with our Bermuda affiliate, supporting our focus on serving middle-income households.”
CNO isn’t alone. Insurance Business cites Moody’s estimate that about $1 trillion of reserves has been ceded offshore since 2017, and AM Best data showing Bermuda held more than 40% of ceded reserves by 2024.
What it means for your policy
Your contract doesn’t change. Colonial Penn still owes you whatever your policy says, at the same premium, and it generally remains the company you deal with. Reinsurance is a deal between insurers. It doesn’t transfer your policy to Bermuda.
There are guardrails, too. According to Insurance Business, citing CNO’s filings, the Bermuda company can’t pay dividends to its parent for five years without regulator approval, and CNO must add capital if the affiliate’s solvency drops below 150% of its required level. CNO also reported that the combined risk-based capital ratio of its U.S. insurance companies was estimated at 374% as of Sept. 30, 2026.
If a U.S. life insurer fails, state guaranty associations step in. In most states, NOLHGA says that coverage is $300,000 in life insurance death benefits and $100,000 in cash surrender value. Most final expense policies are well under those amounts.
The fair criticism is about transparency. When reserves move to a place with lighter capital rules, the cushion behind your policy is thinner than it would be under U.S. rules alone, and policyholders have no say. The NAIC notes that reinsurers outside the U.S. generally must post full collateral unless they’re certified or based in a qualifying jurisdiction, so regulators are watching. Still, it’s worth knowing who’s really holding the money.
The bigger lesson for buyers
Guaranteed acceptance whole life is one of the priciest ways to buy a death benefit. You pay for cash value you’ll likely never use, and Colonial Penn’s own FAQ lists an 8% loan rate, compounded annually, if you borrow against it. For most healthy people in their 50s and early 60s, a term policy paired with steady investing in a low-cost fund will do more for the same money. If health problems really do rule out regular coverage, compare a few guaranteed issue quotes before signing anything.
The Bottom Line
CNO’s Bermuda deal doesn’t change what Colonial Penn owes you, and there are capital rules and guaranty associations behind your policy. But it’s a reminder that insurers manage your premiums to benefit their own balance sheets and shareholders. Know what you own, keep your premiums paid if you need the coverage, and if you’re shopping now, look hard at term before you buy whole life of any kind.
Sources and Further Reading
- CNO Financial Group, Third Quarter 2026 Results, Exhibit 99.1 to Form 8-K (SEC, Oct. 29, 2026)
- Insurance Business, “CNO moves Colonial Penn reserves to Bermuda in third captive deal” (Oct. 30, 2026)
- NAIC, Reinsurance
- NOLHGA, FAQs: Product Coverage
- Colonial Penn, Guaranteed Acceptance Life Insurance
- Photo: David Broad, “Bermuda -Hamilton Harbour,” Wikimedia Commons, CC BY 3.0