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ARA total capital up 6% to $270bn in 2020, despite COVID-19 headwinds

20th April 2021 - Author: Charlie Wood

Despite being hit with roughly $25 billion in pandemic and natural catastrophe-related losses, Aon’s Reinsurance Aggregate (ARA) of reinsurers reported positive earnings for 2020 and an increased capital base, aided by demonstrated access to new funding.

Aon logoARA tracks the financial results of 23 of the world’s leading reinsurance firms annually.

For 2020, it was COVID-19 that dominated the headlines and created unprecedented and unexpected challenges for reinsurers on both sides of the balance sheet.

Despite this, total capital rose by 6% to $270 billion, split between equity of $211 billion (+4%) and debt of $59 billion (+16%)

Property and casualty (P&C) premiums increased by 7% to $223 billion, comprising primary insurance premiums of $107 billion (+6%) and assumed reinsurance premiums of $116 billion (+7%).

Aon notes that 2020 also featured a record number of named storm formations in the Atlantic hurricane season, as well as a continued high frequency of losses from less well-modelled secondary perils.

“Reinsurers generally performed well in very tough circumstances in 2020 and capital remains strong,” said Mike Van Slooten, Head of Business Intelligence for Aon’s Reinsurance Solutions.

“Headline results have been poor in three of the last four years, but the underlying picture is now improving as recent adjustments to pricing and other terms and conditions feed through.”

Elsewhere in the report, Aon’s found net P&C combined ratio was 103.4%, with COVID-19 losses of $14 billion contributing 8.0 percentage points (pp), and natural catastrophe losses of $8.7 billion adding another 5.0pp.

Additionally, life and health reinsurance GPW stood at $54 billion; this segment generated additional COVID-19 related losses of $2.4 billion.

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