Global reinsurer capital up 5% to $480 billion: Aon Benfield

by Artemis on September 4, 2012

Reinsurance intermediary Aon Benfield have published the latest edition of their twice yearly Aon Benfield Aggregate report today in which they look at the financial position of the world’s top reinsurers. In it they say that at the 30th June 2012 global reinsurer capital was up 5% on six months previous to $480 billion. New capital entering the sector, in a variety of forms, accounted for as much as $5 billion of the growth which  underscores the attractiveness of reinsurance right now.

Aon Benfield say that their measurement of $480 billion represent available capital for re/insurers to trade risk with and it includes both traditional and non-traditional forms of reinsurance capital. Gross premiums written are up according to the report, largely due to higher pricing in loss affected lines of business. The influx of new capital, along with effective capital management by reinsurers, has helped to keep pricing pressure down according to the report.

It would be interesting to know how the $5 billion of neew capital which flowed into reinsurance was split between traditional and non-traditional uses. Even some of the new, traditional reinsurers have their capital sourced from hedge funds look for insurance returns and have an investment-backed collateralized approach to underwriting. We suspect that a good proportion of this $5 billion of new capital went to the alternative market.

A number of new companies deployed sidecar capacity in the first half of the year to take advantage of rising rates in catastrophe affected lines of business. However there was also evidence of new entrants bringing capital into the space and not just to target catastrophe lines of business, some of the newly established reinsurers have a broader mandate to target lines such as casualty to achieve the returns their backers, such as hedge funds, are seeking. Examples of new reinsurer entrants include Third Point Re and PAC Re who both set up business in Bermuda in 2012. Aon Benfield also says that the increased level of investment in sidecars and catastrophe bonds in the first half of the year was noteworthy.

The Aon Benfield Aggregate itself looks at 31 publicly reporting reinsurers and uses their finances as a benchmark for the sector. They found that the 31 reinsurers combined ratio stood at 90.1%, down from 117.8% in the first half of 2011, producing an underwriting profit of $6.6 billion, with all but one constituent reporting positive results.

Mike Van Slooten, Head of Aon Benfield’s International Market Analysis team, commented; “In stark contrast to the prior year, the relatively low level of insured catastrophe losses in the first half of 2012 allowed most ABA companies to report good earnings and consequent capital growth.”

You should also read our article from earlier today on reinsurance sector capitalisation comments from Fitch.

You can access the full report from Aon Benfield here.

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