Global Reinsurer Capital at Record US$505bn
Global reinsurer capital reached a record US$505bn at the end of 2012, an increase of 11% or US$50bn on the level a year earlier according to an estimate by Aon Benfield Analytics.
The firm’s latest Aon Benfield Aggregate (ABA) study found that capital reported by the ABA group of 31 leading reinsurers increased by 12% US$33bn to US$313bn, driven primarily by US$29.5bn of net income and US$15.9bn of unrealised capital gains. Dividends and share buybacks rose marginally to US$16.1bn. 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.
Further key findings of the ABA study include:
“The low interest rate environment not only has impacted what reinsurers earn on their invested funds but it has added significantly to the competitor landscape,” said Mike Van Slooten, head of Aon Benfield’s international market analysis team.
“Diversified yield seeking investors are now adding material pressure (in terms of price and value competition) and benefits (in terms of lower cost underwriting capital) to the reinsurance market. We expect material changes to the capital structure of the largely equity financed reinsurance market as material new flows of capital are integrated into reinsurance underwriting capital.”