Global Reinsurer Capital hits US$570bn

Global reinsurer capital reached a record level of US$570bn by the end of June, an increase of 6% or US$30bn over the six months from the end of December 2013, according to an estimate by Aon Benfield Analytics.

Aon Benfield, the Aon group’s global reinsurance intermediary and capital advisor has launched the latest edition of its ‘Aon Benfield Aggregate’ (ABA) report, which analyses the financial results of the world’s leading reinsurers in the first half of 2014.

Its calculation is a broad measure of capital available for insurers to trade risk with and includes both traditional and non-traditional forms of reinsurance capital.

The firm’s latest study found that capital reported by the ABA group of 31 leading reinsurers increased by 4% (US$14bn) to US$351bn (62% of global reinsurer capital), driven primarily by US$18.6bn of net income and US$9.4bn of unrealised capital gains. The main offset was US$14.3bn of dividends and share buybacks.

Further key findings relating to the 29 publicly-listed holding companies in the ABA include:

  • Gross property and casualty (P&C) premiums rose by 4% to US$109bn, with growth split evenly between insurance and reinsurance business.
  • The combined ratio rose by 0.4 percentage points to 90.3%, with P&C underwriting profit unchanged at US$7.9bn.
  • Catastrophe losses declined relative to the prior year and were well below the long-term average.
  • Support from the favourable development of prior year reserves declined by 5% to US$2.8bn.
  • Return on equity stood at 12.2% in the first half of 2014, the highest level since 2009.
  • Net catastrophe exposures are reducing as risk transfer to the capital markets increases via the third party capital structures dubbed ‘sidecars’, insurance-linked securities (ILS) and more cost effective retrocession cover.

“The influx of alternative capital is lowering risk transfer costs for both insurers and reinsurers, creating a win-win situation that should drive market expansion in the medium-term,” said Mike Van Slooten, head of Aon Benfield’s international market analysis team.

“We are closely monitoring developments in what is a very dynamic environment. As such, peer studies such as the ABA report, which assess comparative performance on a timely basis, are becoming increasingly relevant.”

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