Reinsurance capital grows amid changing landscape
Global reinsurance capital totalled $510 billion at June 30, 2013, an increase of 1 percent ($5 billion) relative to December 31, 2012, according to Aon Benfield in the latest edition of its Aon Benfield Aggregate (ABA) report, which analyses the financial results of the world’s leading reinsurers in the first half of 2013.
The calculation represents a broad measure of capital available for insurers to trade risk with and includes both traditional and non-traditional forms of reinsurance capital.
The firm's latest study found that capital reported by the ABA group of 31 leading reinsurers fell by 1% ($4 billion) to $313 billion; solid earnings being offset by more active capital management, adverse foreign exchange movements and unrealized losses on bond portfolios.
The report also found that gross property/casualty (P&C) insurance and reinsurance premiums written by the ABA rose by 5% to $109 billion. The main engine of organic growth was the US market, driven by improving economic conditions and higher pricing in certain primary insurance lines.
The report also noted the growing trend of reinsurers forming sidecars or units capable of leveraging the vast amounts of third party capital flowing into the business.
Mike Van Slooten, head of Aon Benfield’s International Market Analysis team, said: “The ABA companies reported strong underwriting results in the first half of 2013. Interest rates have begun to rise ahead of expected tapering of the Federal Reserve’s quantitative easing program, which is negative for book values in the short-term but positive for earnings in the longer-term.
“We continue to see evidence of operational restructuring and strategic repositioning, as established reinsurers react to the threats and opportunities posed by the deployment of new funds from capital markets investors.”
