Alternative capital expected to regain momentum: Aon

The growth in alternative capital has slowed since its surge in late 2017 and early 2018, although it is expected to regain momentum this year as losses are developed and finalised, according to Aon’s Reinsurance Market Outlook for April 2019.

Assets under management in the alternative capital sector rose to $97 billion at December 31, 2018, an increase of $8 billion (9 percent) year-on-year. This total is gross of collateral trapped on contracts impacted by the major natural catastrophe losses in 2017 and 2018.

While this figure is up from 2017, the rate of growth in alternative capital has slowed in comparison with years prior. The continuing entry of new funds has been partially offset by losses from catastrophe activity and redemption requests from investors, the report said.

Aon expects growth to continue in this area once the market has fully digested the losses incurred over the last two years.

“Many long-term investors have made good returns over time and the strategy of investing in insurance risk for diversification purposes in a low interest rate environment remains valid,” the report stated.

Collateralised reinsurance continue to make up over half of the total alternative capacity provided and catastrophe bonds had the second highest issuances in 2018.