Alternative capital jumps 3% in Q1: Aon Benfield

Alternative capital reached $66 billion by the end of the first quarter of 2015, an increase of more than 3 percent since year end 2014.

This is the finding of Aon Benfield’s latest reinsurance market outlook, which added that catastrophe bonds decreased slightly to $22.1 billion, while sidecars increased $1 billion to $7.6 billion.

Overall, a record $1.7 billion of catastrophe bonds were issued in the first quarter and another $3 billion were issued in the second quarter.

Collateralised reinsurance continued to climb gaining $3 billion in the first quarter of 2015, ending the period at $32.7 billion.

“Investors continue to show broad interest in insurance-linked securities, however, asset managers are demonstrating discipline in their capital deployment,” said the report.

In total, reinsurance capital reached $580 billion by the end of the first quarter of 2015, an increase of 1 percent over year end 2014. However, growth slowed compared to the first quarter of 2014, where reinsurance capital hiked 3 percent.

Aon Benfield said there were a number of positive and negative factors behind the overall increase through the quarter.

Partially offsetting growth was a contraction in shareholders’ funds, partly attributable to the weakening of the euro, and a number of catastrophe bond maturities caused a reduction in the amount outstanding at March 31, 2015.

However, this was counteracted by continued growth in the contribution from alternative capital and from government schemes, principality the Florida Hurricane Catastrophe Fund.

“Total alternative capital was up modestly in Q1 2015 and remains impactful to the overall market for risk transfer, as more traditional reinsurers incorporate into their capital structures and enhance offerings to their primary insurer customers,” said the report.