Global dedicated reinsurer capital rebounded to its pre-pandemic high of USD 625 billion by the end of Q3 2020, aided by continued capital market recovery and capital raises, reports insurance and reinsurance broker Aon.
At the end of the third-quarter of 2020, traditional reinsurance capital reached a new high of USD 533 billion, representing growth of around 0.6% from the USD 530 billion reported at the end of 2019.
The new peak for traditional capital was supported by both a capital market rebound in Q2 and Q3, and approximately USD 10 billion of new issuance, says Aon.
At the same time, Aon reports that while alternative, or third-party reinsurance capital did rebound somewhat in the second-quarter of the year, it remains below 2019 year-end levels, ending Q3 at USD 92 billion.
As catastrophe bond issuance and related insurance-linked securities (ILS) issuance surged in 2020 to a new high of USD 16.4 billion, as shown by the Artemis Deal Directory, collateralised reinsurance continued to retract, while both sidecars and ILWs remained relatively stable, notes Aon.
Overall, global reinsurer capital ended the third-quarter at USD 625 billion, which is line with the volume recorded at the end of 2019, prior to the arrival of the COVID-19 pandemic.
Looking forward, Aon expects capacity to meet demand for future renewals and advises that additional new capacity will likely enter the market in 2021. Furthermore, the re/insurance broker expects risk-strategies to evolve in the weeks and months ahead as the impact of the ongoing pandemic becomes clearer and the potential return of social inflations looms.