Aon Benfield Reports 6% Decline in Global Reinsurers’ Capital

June 16, 2011

Aon Benfield has launched the latest edition of its Aon Benfield Aggregate (ABA) report, which analyses the financial position of the world’s leading reinsurers at the end of the first quarter.

The report, compiled by Aon Benfield Analytics, estimates that total global reinsurer capital declined 6 percent from $470 billion at December 31, 2010 to $440 billion at March 31, 2011. It notes that the primary driver for the decline was the “high level of insured catastrophe losses in the quarter. This calculation is a broad measure of capital available for reinsurance and includes both traditional and nontraditional forms of reinsurance capital.

“The latest study compiled by the Market Analysis team found that the ABA group of 28 leading reinsurers reported capital totaling $238.3 billion at the end of the first quarter – a decline of 3.4 percent or $8.3 billion from the end of 2010. The main contributory factors were $4.3 billion of net losses, $2.5 billion of unrealized investment losses, $2.0 billion of dividend payments and $2.0 billion of share buy-backs.”

In addition the analysis found that the “first quarter combined ratio rose by 38.3 percentage points to 143.7 percent, with $15.1 billion of catastrophe losses representing 57.1 percent of net premiums earned. This translated into a property and casualty underwriting loss of $11.5 billion. The total investment return reported by the ABA fell by almost a third to $9.0 billion, driven by a much lower level of capital gains.

The overall net loss of $4.3 billion reported by the ABA reinsurers for the first quarter of 2011 represented a negative return on average common equity of 1.8 percent. This followed a return of 10.4 percent or $23.5 billion for the whole of 2010.”

Mike Van Slooten, head of Aon Benfield’s International Market Analysis team, commented: “The ABA entered 2011 with peak levels of capital and the decline in reported shareholders’ funds was only 3.4 percent in the first quarter, despite significant incurred catastrophe losses. We would expect to see this recovered in the second quarter, everything else being equal.”

Source: Aon Benfield

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