Global reinsurer capital rose by $45 billion to $635 billion over the nine months to September 30, 2023, driven by retained earnings, recovering asset values and new inflows to the catastrophe bond market, according to insurance and reinsurance broker Aon.
As per the firm’s latest Reinsurance Market Dynamics, shareholders’ equity reported by global reinsurers also increased by $35 billion to $532 billion over the nine months to September 30, 2023.
“The sector is viewed as well capitalized relative to the risk currently being assumed, as confirmed by strong regulatory and rating agency capital adequacy ratios. However, much more capital will be required if current unmet needs are to be addressed over time,” Aon explained.
The firm’s report observed that traditional reinsurers generally performed well in the first nine months of 2023, despite a continuing frequency of medium-sized natural catastrophe events, “suggesting that the recent reset in property pricing, retentions and other terms and conditions has created a path to more sustainable earnings.”
Aon recently disclosed that the January 1st, 2024, reinsurance renewal was “relatively smooth”, characterised by a rebound in profitability, rebuilding capital positions, and increased availability of retrocession capacity.
However, the global broker warned that ongoing uncertainty around the impacts of climate change, inflation, litigation funding, and heightened geopolitical risk on loss costs are “keeping potential investors on the sidelines,” and this is despite the expectation that many reinsurers will “easily” cover their cost of capital in 2023.
