Reinsurer capital reached all time high of $470 billion at end of 2010

by Artemis on April 20, 2011

Total global reinsurer capital reached an all time high of $470 billion at 31st December 2010 according to a report from Aon Benfield. That figure of $470 billion was an increase of 17% over the 2009 period. As a result they believe reinsurers are capitalised enough to withstand the Q1 catastrophe losses.
The increase in year on year capital was largely driven by realised and unrealised investment returns. Aon Benfield don’t expect much in the way of share buybacks from reinsurers ahead of hurricane season.

We wrote yesterday about the upstream capital entering the reinsurance market and how that was likely to help keep rates level in the main. This report from Aon Benfield seems to suggest that there is more capital than ever in the reinsurance market.

The Aon Benfield Aggregate report analyses the end of 2010 financial position of the world’s leading reinsurers and looks at how 2011 catastrophe losses could impact them.

Key findings were:

  1. Gross property and casualty premiums written were flat at USD124 billion, with the impact of weakening pricing offset by positive effects related to reinstatements and acquisitions;
  2. The combined ratio rose by 5.7 percentage points to 95.3%, driven by disclosed catastrophe losses equivalent to 9.1% of net premium earned;
  3. Non-life underwriting profit fell by USD6.0 billion to USD4.8 billion, including a contribution of USD5.1 billion from prior year reserves.

Aon Benfield believe that losses incurred by reinsurers in 2011 fall within expected annual income and represent an earnings event rather than a capital event for the reinsurance industry.

Mike Van Slooten, head of Aon Benfield’s International Market Analysis team, said: “The ABA companies performed well in 2010 despite a number of catastrophe losses. Aggregate capital was at record levels at year-end, leaving the sector well-positioned to manage the events that have taken place in the first quarter of 2011.”

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