Global Reinsurer Capital Reaches $510 Billion: Aon Benfield Survey

September 3, 2013

The latest edition of the Aon Benfield Aggregate (ABA) report, which analyses the financial results of the world’s leading reinsurers in the first half of 2013, concludes that “a continuing influx of new funds from capital markets investors offsets the unwinding of unrealized investment gains,” and has produced a net increase in reinsurers’ capital.

Aon Benfield Analytics estimates that global reinsurer capital totaled $510 billion as of June 30, 2013, “an increase of 1 percent ($5 billion) relative to December 31, 2012. This calculation is 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 percent ($4 billion) to $313 billion; solid earnings being offset by more active capital management, adverse foreign exchange movements and unrealized losses on bond portfolios.

Further key findings of the ABA study include:
— Gross property and casualty (P&C) insurance and reinsurance premiums written by the ABA rose by 5 percent 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 ABA combined ratio improved by 1.7 points to 89.0 percent, driven by improved attritional loss experience and more favorable prior year reserve development
— P&C underwriting profit rose by 26 percent to $8.9 billion, with all constituents reporting positive results.
— Annualized pre-tax operating returns (excluding all realized and unrealized gains and losses) relative to total equity stood at 11.4 percent, down from 12.0 percent in the first half of 2012
— New sidecar sponsorship and the formation of in-house fund management operations are testament to the ABA’s increasing level of engagement with third party capital.

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.”

Source: Aon Benfield

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