Reinsurance capital down 30% after 9M, alt-cap fenced out: Swiss Re

Traditional reinsurance capital had likely declined by as much as 30% through the first three quarters of 2022 with no apparent relief in sight, analysts at  Swiss Re have claimed in recent research.

It's a one-two punch of self-imposed disciplined from a bruised industry and the heavy punch taken to balance sheets by bond market losses suffered int he first half of 2022.

In research otherwise dedicated to the impact of Hurricane Ian, Swiss Re analysts cite the capacity-killing impact of reinsurances licking their wounds after years of nat cat losses and "actively managing limits making capacity relatively scarce."

But the bond market losses are only straw on a camel's back.

"Even after adjusting for unrealised losses due to interest rate changes, exposures are rising faster than reinsurance capital," analysts write.

Alternative capital will not ride to the rescue. Reinsurers may have developed an addiction to alternative capital, Swiss Re notes, as it "now provides most of the retrocession market."

A "significant amount" of retrocession capacity may be trapped and "not fully replenished" for the 1.1 renewals, Swiss Re warns.

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