Data from Aon’s Reinsurance Aggregate (ARA) report shows that the capital of the world’s leading reinsurers remained “unchanged” at June 30, 2020, relative to the end of 2019.
The report, which analysed the financial performance of 23 of the largest global reinsurers, found that total capital stood at $255 billion at the end of Q2, with split equity of $201 billion (-1%) and debt of $54 billion (+6%).
The ARA group of reinsurers underwrites roughly 50% of the world’s non-life reinsurance premiums, and a large majority of the life reinsurance premiums, making their dynamics a reasonable proxy for the reinsurance sector as a whole.
Analysts noted that the COVID-19 dominated financial results in H1, impacting underwriting results and adding extreme capital market volatility to investment returns.
As a result, an overall loss was sustained for the period, but the capital base remained resilient after a strong capital markets recovery in the second quarter.
The ARA report compares with the results of a similar study recently carried out by reinsurance broker Willis Re, which established that global reinsurance industry was $587 billion at June 30th, reflecting a decline of just 3% when compared with year-end 2019.
Aon also reported that property and casualty (P&C) re/insurance gross premiums written (GPW) among the group rose by 5% to $114 billion, assisted by risk-adjusted renewal rate increases.
And as previously disclosed, the net combined ratio stood at 104.1%, with COVID-19-related losses of $8.2 billion contributing 9.7 percentage points and natural catastrophe losses adding another 2.8 points.
Meanwhile, life and health reinsurance GPW stood at $25 billion, and this segment generated additional COVID-19-related losses of $1.0 billion.
Aon further reported that total investment yield reported through income statements fell to a post-financial crisis low of 2.1%, driven by the capital market volatility associated with COVID-19 and the impact of emergency cuts in interest rates following the onset of the pandemic.
The net loss for the period was $1.1 billion, representing an annualized return on equity of -1.5%.
“While it is already clear that the ARA will not cover its cost of capital in 2020, more positively, the group’s capital position remains robust, after a strong capital market recovery in the second quarter,” said Mike Van Slooten, Head of Business Intelligence for Aon’s Reinsurance Solutions business and author of the ARA.
“Several constituents demonstrated their financial flexibility by raising new funds,” he added, “and others were successful in attracting new alternative capital to support their business positions, despite the challenging market conditions.”
