Global reinsurance capital decreased in Q3 2018 but ILS capacity up

Global reinsurance capital decreased in the third quarter of last year though the mix of capital available changed within this with alternative capital supplying a higher percentage of what was available to insurers, according to a report by Aon.

Global reinsurance capital stood at $595 billion at September 30, 2018, down 2 percent relative to the end of 2017. This calculation is a broad measure of the capital available for insurers to trade risk with. Traditional capital fell by $20 billion to $496 billion (-4 percent), while alternative capital rose by $10 billion to $99 billion (+11 percent).

That was the finding of a report by Aon's Reinsurance Solutions business; the January 2019 edition of the Reinsurance Market Outlook: Value Proposition to Buyers Remains High Despite Interesting Market Dynamics, which provides a comprehensive assessment of the key market variables that will affect reinsurance buyers in future 2019 renewals.

The report also noted that reinsurance buyers continue to secure protection at accretive cost of capital terms despite a reduction in global reinsurer capital through 9M 2018. Global reinsurance capital overall fell 2 percent since year end 2017 from $605 billion to $595 billion.

Reinsurance demand showed slight increases in traditional products and lines driven by regulatory requirements, continued attractive market dynamics for buying, and recent losses in non-peak territories that have advocated for more robust coverage for these perils; however even with this increase, supply continues to outstrip demand.

Insured catastrophe losses over the past two years aggregate to approximately $230 billion. While 2017 created a new peak at approximately $147 billion, 2018 losses alone are currently estimated at $85 billion, 47 percent higher than the 2000-2017 average of $56 billion.

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