Aon Benfield Study: Global Reinsurer Capital at New Peak – $570 Billion

September 8, 2014

The latest edition of the Aon Benfield Aggregate (ABA) report, which analyzes the financial results of the world’s leading reinsurers in the first half of 2014, estimates that global reinsurer capital reached a record level of $570 billion at June 30, 2014, an increase of 6 percent ($30 billion) relative to December 31, 2013.

The “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 announcement explained.

The ABA report also concluded that the capital position “of 31 leading reinsurers increased by 4 percent ($14 billion) to $351 billion (62 percent of global reinsurer capital), driven primarily by $18.6 billion of net income and $9.4 billion of unrealized capital gains. The main offset was $14.3 billion of dividends and share buybacks.”

Other key findings relating to the 29 publicly-listed holding companies in the ABA’s report include the following:
• Gross property and casualty (P&C) premiums rose by 4 percent to $109 billion, with growth split evenly between insurance and reinsurance business.
• The combined ratio rose by 0.4 percentage points to 90.3 percent, with P&C underwriting profit unchanged at $7.9 billion.
• Catastrophe losses declined relative to the prior year and were well below the long-term average.
• Support from the favorable development of prior year reserves declined by 5 percent to $2.8 billion.
• Return on equity stood at 12.2 percent in the first half of 2014, the highest level since 2009.
• Net catastrophe exposures are reducing as risk transfer to the capital markets increases via sidecars, insurance-linked securities and more cost effective retrocession cover.

Mike Van Slooten, Head of Aon Benfield’s International Market Analysis team, said: “The influx of alternative capital is lowering risk transfer costs for both insurers and reinsurers, creating a win-win situation that should drive market expansion in the medium-term.

“Aon Benfield has made major advances in its analysis of reinsurers’ financial performance in recent years, in response to growing insurer demand for strategic insight into longer-term industry trends.

“We are closely monitoring developments in what is a very dynamic environment. As such, peer studies such as the ABA report, which assess comparative performance on a timely basis, are becoming increasingly relevant.”

Aon Benfield also explained that the “ABA reports are produced on a half-yearly basis and cover the reported results of 31 major reinsurers worldwide, with the aim of identifying the latest trends in the P&C reinsurance marketplace.

“The study comprises 29 publicly-listed holding companies (‘the listed ABA’) and two US-domiciled subsidiaries of Berkshire Hathaway, namely National Indemnity Company (NICO) and General Reinsurance Corporation (Gen Re). NICO entered into a significant intra-group reinsurance transaction with GEICO Group effective January 1, 2014, which has had a material impact on its reported results. To provide a more meaningful picture of the sector’s underlying performance, many of the charts and ratios now focus on the listed ABA.”

Source: Aon Benfield

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