Reinsurance News

Global reinsurer capital up 1% in Q1: Aon

13th August 2018 - Author: Luke Gallin

Global, dedicated reinsurance capital increased by 1% during the first three months of 2018 from the end of 2017, to $610 billion, driven by the continued expansion of the alternative reinsurance capital space, according to Aon.

Insurance and reinsurance broker, Aon, has revealed that during the first-quarter of 2018, traditional reinsurance capital remained flat at $515 billion, while alternative capital increased by 7%, or $6 billion, to $95 billion, when compared with the end of 2017.

The continued growth of alternative, or third-party reinsurance capital has continued in 2018 despite the market experiencing what’s been described as its first major test, being the losses from hurricanes Harvey, Irma, and Maria, as well as two powerful earthquakes in Mexico and severe wildfires in California, which all occurred in the second-half of last year.

The 7% growth recorded by the alternative space during Q1 2018, means that this increasingly influential sub-sector of the reinsurance industry now represents 16% of total, global reinsurance capital.

The chart below, provided by Aon, shows the growth of both traditional and alternative reinsurance capital over the last 12 years, which, combined, has taken global reinsurance capital to its highest ever level at $610 billion, according to Aon’s figures.

Aon q2 2018 ILS growth

As the chart highlights, global reinsurer capital has increased in all but three of the last 12 years, with the largest declines occurring in 2008 (U.S. financial crisis) and 2011 (Tohoku earthquake in Japan & Christchurch, New Zealand quakes).

However, despite the large losses experienced in 2017, widely reported to total approximately $140 billion for the insurance and reinsurance industry, the presence of alternative capital and its ability to reload post-event, meant that global reinsurer capital still increased as a result of growth in the alternative space, as traditional capacity remained stable.

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