Analysis by insurance and reinsurance broking group Aon finds that global reinsurer capital increased by 4% during the first quarter of 2024 to a new high of $695 billion, with growth in both traditional and alternative capital.
From the end of 2023 to the end of March 2024, global reinsurer capital rose from $670 billion to $695 billion on the back of retained earnings, recovering asset values, and new inflows into the catastrophe bond market.
During Q1 2024, traditional reinsurance capital grew by $23 billion, or more than 4% to a new high of $585 billion, according to Aon. The broker attributes the growth to strong underwriting results and improved total investment yields, which together generated “very strong returns on equity.”
As well as growth in traditional capital, the volume of alternative reinsurance capital also increased in the period by around 2%, rising from $108 billion to $110 billion as at the end of March 2024. This is an all-time for the overall level of insurance-linked securities (ILS) capital in the global reinsurance sector, and was driven by the record level of cat bond issuance in Q1, which has actually accelerated in Q2, which has also broken issuance records for the sub-sector of the ILS space.
As you can see from the chart below, total, global reinsurer capital has increased by $130 billion, or 23% since the end of 2015, and at the end of Q1 2024, is $20 billion higher than the previous end of year high in 2021. Elevated losses from secondary perils and other events led to a decline in overall reinsurer capital in 2022, with alternative capital falling slightly but traditional capital falling to its lowest level in years, at just $482 billion.
However, in 2023 reinsurers tightened terms and conditions in the hardening market and moved away from frequency losses and aggregate covers, which, alongside higher risk-adjusted rates across the board at renewals, led to a recovery in capital levels in 2023.
Aon’s data shows that this recovery persisted in the first quarter of this year and actually took the level of dedicated reinsurer capital to a new high of $695 billion.
