Reinsurance capital at $510bn despite investment drag

According to the latest Aon Benfield Aggregate (ABA) report, released this week, global reinsurer capital has reached $510 billion. This figure—a broad measure of capital available for insurers to trade risk with and includes both traditional and non-traditional forms of reinsurance--  is an increase of 1 percent compared to the end of 2012.

According to Aon Benfield solid earnings are being offset by more active capital management, adverse foreign exchange movements and unrealised loss on bond portfolios. In a report released last week fellow broker Guy Carpenter came to similar conclusions. The report also found that gross property and casualty reinsurance premiums written by ABA rose by 5 percent. The main engine of this growth was the US market, which Aon Benfield found to be driven by improving economic conditions and higher pricing in certain primary insurance lines. The report also found that new sidecare sponsorship and the formation of in-house fund management operations are a 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.”

Correction: in our newsletter, we confused the figure and stated $150 billion in the first paragraph. Apologise for the mix up.