Global, overall reinsurance capital increased by 2% year-on-year to reach $605 billion at the end of 2017, according to reinsurance broker Aon Benfield’s April Reinsurance Market Outlook.
According to Aon Benfield’s analysis, much of the growth came from the alternative reinsurance market, which grew by $8 billion from the end of 2016 to $89 billion.
Traditional reinsurance capacity increased by $2 billion to end 2017 at $516 billion, resulting in an overall availability of dedicated reinsurance capital of $605 billion, compared with $595 billion at the end of 2016.
The broker explains that while the increase in global reinsurer capital might seem somewhat counter-intuitive, given the huge level of catastrophe losses experienced in the second-half of 2017, a number of factors influenced the marketplace.
This includes the generally high retentions of primary players, which meant that the reinsurance industry assumed a relatively low proportion of industry losses, less than one third, estimates Aon Benfield.
At the same time, some of the losses from the U.S. events were retained by government agencies, with Aon Benfield estimating this to be as much as $20 billion.
Furthermore, the continued appetite of third-party investors to participate in the sector remained and actually increased post-event, which, combined with a continuation of favourable prior year reserve development for reinsurers, higher investment returns, and the weakening of the US dollar against major currencies, helped the volume of dedicated reinsurance capacity expand year-on-year, despite 2017’s losses.