NEW YORK (Bloomberg) — Genworth Financial said US and Bermuda-based affiliates assumed about $8.3 billion of reserves from its main units at the end of 2012.

Genworth, the largest seller of private long-term care insurance (LTCI) coverage, disclosed correspondence with the US Securities and Exchange Commission (SEC).

The Richmond, Virginia-based company said it would probably face increased costs and the need to curb sales of some products if it were required to stop using reinsurance subsidiaries, known as captives, to build reserves.

The National Association of Insurance Commissioners (NAIC) is reviewing regulations tied to captive insurance, and the Treasury Department’s Federal Insurance Office has called for stronger oversight.

New York state’s insurance regulator, Benjamin Lawsky, has said some companies use reinsurance transactions with affiliates to make reserves appear larger than they are.

Without using captives for its life business, Genworth would face “increased costs related to alternative financing, such as third-party reinsurance, and potential reductions in or discontinuance of new term or universal life-insurance sales”, the company said in a November 14 letter. “We are currently unable to predict the ultimate outcome of the NAIC review.”

Genworth said most of the $7.3 billion in reserves at its Bermuda-based units stem from the LTCI business. Today’s filings include queries from the SEC about the reserves and Genworth’s responses.

Captives are units set up by a firm to cover risk elsewhere in the company. They may be located in offshore locations such as Bermuda and the Cayman Islands, or in the United States.

Reinsurance Group of America Inc also disclosed correspondence with the SEC related to its transfers of risk to subsidiaries.

“The company expects to continue its strategy of using captives to enhance its capital efficiency and competitive position,” Chesterfield, Missouri-based RGA said in an October 24 letter to the SEC. The reinsurer said it can’t judge the impact of changes to the strategy because of “unknown variables”.

MetLife, the largest US life insurer, said in May that it would combine an offshore reinsurer with three US life units, after Lawsky began his review.

The “inquiry regarding captives was an important factor in our taking a closer look at our offshore reinsurance subsidiary”, Steve Kandarian, chief executive officer of New York-based MetLife, said May 21 at an investor presentation. “We’re going to take steps to bring these businesses back onshore.”