Global reinsurer capital up 17% to $670bn in 2023: Aon

Global reinsurer capital rose by approximately 17% to $670 billion in 2023, with growth of 17% in traditional reinsurance capital and 16% growth in alternative capital to a new all-time high, according to insurance and reinsurance broker Aon.

The broker’s April 2024 Reinsurance Market Dynamics report shows that the rebound in traditional capital is almost complete, with Aon estimating that shareholders’ equity reported by global reinsurance firms rose by $80 billion to $562 billion as at the end of 2023.

This is a turnaround from the $97 billion decline witnessed over the course of 2022, which was largely linked to the dramatic increase in global interest rates, which served to lower the market value of existing lower yielding bond portfolios on company balance sheets.

At the same time, alternative, or insurance-linked securities (ILS) capital grew by an impressive 16% during the course of 2023, ending the year at a record $108 billion.

Aon attributes the growth in total global reinsurer capital, which you can see in the chart below, to retained earnings, recovering asset values, and the record-breaking year for the catastrophe bond market.

The meaningful rise in both traditional and alternative capital over the course of 2023 suggests that improving reinsurer results and elevated cat bond spreads attracted investors in 2023.

In the chart below, you can see the “highly unusual swings” witnessed over the last eight quarters, as reported by Aon.

It’s notable that reported equity declined by a significant $112 billion over the nine months to the end of September 2022, but has since recovered by $95 billion. Aon attributes this to robust underwriting results, higher ordinary investment yields, and the pull to par effect.

With total dedicated reinsurer capital almost rebounding completely in 2023, it’s promising that Aon reports continued investor appetite early in 2024.

“The increased interest is encouraging, but it has not yet translated into new company formations, due largely to continuing concerns over the impact of climate change and social inflation on future loss costs.

“Nevertheless, capital is building quickly, with established reinsurers expected to perform strongly again in 2024 (in the absence of very large primary peril losses) and the pull-to-par effect providing a further tailwind. To the extent that it is deployed into the reinsurance market, newly generated capital can be expected to exert downward pressure on pricing and other terms and conditions at future renewals,” says the global re/insurance broking group.

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.