Advertise here, Reinsurance News

Menu

Reinsurance News

Fall in traditional equity drives 3% decline in global reinsurer capital: Aon

15th April 2019 - Author: Luke Gallin

Global, dedicated reinsurance capital declined by 3% in 2018 ending the year at $585 billion, driven by a fall in traditional capital as the alternative sector grew once again, according to Aon’s 2019 Reinsurance Market Outlook.

From the end of 2017 to the end of 2018, traditional reinsurer capital declined by 5%, or $28 billion to $488 billion, driven mostly by a number of macroeconomic factors, says insurance and reinsurance broker Aon.

These include higher U.S. interest rates, the strengthening of the U.S. dollar, and also a stock market correction in the final quarter of last year, with a change to accounting significantly impacting company results.

The reduction in traditional capital throughout the year was somewhat offset by the continued, albeit slowed entry of alternative, or third-party reinsurance capital. According to Aon, alternative capital increased by 9%, or $8 billion to $97 billion in the period, mitigating the negative impacts of macroeconomic factors on the capital level of the global reinsurance market.

Aon reinsurance capital growth

Aon notes that the above chart shows the total of alternative capital gross of trapped collateral, as a result of the catastrophe events in 2017 and 2018.

Insured catastrophe losses over the last two years exceeded $240 billion, but despite this, Aon highlights that global reinsurer capital remains resilient and in fact, excess capacity continues to exist in spite of greater demand for reinsurance solutions, globally.

“The proportion of the losses accruing to reinsurers has been relatively low, given the profile of the underlying events and the high retentions carried by large primary insurers. Furthermore, the reinsured portion has been spread around a much broader pool of investors than has historically been the case,” explains the broker.

Ultimately, and supported by the increased utilisation of the capital markets, Aon notes that global reinsurers remain strongly capitalised on a risk-adjusted basis.

“They utilize the capital markets to manage their gross exposures, carry significant budgets for net natural catastrophe losses and rely on investment returns to underpin their earnings. As a result, they have generally been able to trade through recent events without capital impairment,” says Aon.

Recent Reinsurance News

Getting your daily reinsurance news from Reinsurance News is a simple way to receive only the reinsurance industry news that matters, delivered directly to your email inbox.

  • Only email is mandatory, but the more you tell us about yourself the better we can serve you in future!
  • This field is for validation purposes and should be left unchanged.

By submitting the form you are giving your consent to be emailed by us.

Read previous article:
Baloise acquires Belgian insurer Fidea from Anbang for €480m

Baloise Group, a Swiss insurer, has moved to acquire Belgian insurance firm Fidea NV from China's Anbang Insurance Group in...

Close