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The latest edition of the, which analyzes the financial results of the world’s leading reinsurers in the first half of 2014, estimates that global reinsurer capital reached a record level of $570 billion at June 30, 2014, an increase of 6 percent ($30 billion) relative to December 31, 2013.

The “calculation is a broad measure of capital available for insurers to trade risk with and includes both traditional and non-traditional forms of reinsurance capital, the announcement explained.

The ABA report also concluded that the capital position “of 31 leading reinsurers increased by 4 percent ($14 billion) to $351 billion (62 percent of global reinsurer capital), driven primarily by $18.6 billion of net income and $9.4 billion of unrealized capital gains. The main offset was $14.3 billion of dividends and share buybacks.”

Other key findings relating to the 29 publicly-listed holding companies in the ABA’s report include the following:
• Gross property and casualty (P&C) premiums rose by 4 percent to $109 billion, with growth split evenly between insurance and reinsurance business.
• The combined ratio rose by 0.4 percentage points to 90.3 percent, with P&C underwriting profit unchanged at $7.9 billion.
• Catastrophe losses declined relative to the prior year and were well below the long-term average.
• Support from the favorable development of prior year reserves declined by 5 percent to $2.8 billion.
• Return on equity stood at 12.2 percent in the first half of 2014, the highest level since 2009.
• Net catastrophe exposures are reducing as risk transfer to the capital markets increases via sidecars, insurance-linked securities and more cost effective retrocession cover.

Mike Van Slooten, Head of Aon Benfield’s International Market Analysis team, said: “The influx of alternative capital is lowering risk transfer costs for both insurers and reinsurers, creating a win-win situation that should drive market expansion in the medium-term.

“Aon Benfield has made major advances in its analysis of reinsurers’ financial performance in recent years, in response to growing insurer demand for strategic insight into longer-term industry trends.

“We are closely monitoring developments in what is a very dynamic environment. As such, peer studies such as the ABA report, which assess comparative performance on a timely basis, are becoming increasingly relevant.”

Aon Benfield also explained that the “ABA reports are produced on a half-yearly basis and cover the reported results of 31 major reinsurers worldwide, with the aim of identifying the latest trends in the P&C reinsurance marketplace.

“The study comprises 29 publicly-listed holding companies (‘the listed ABA’) and two US-domiciled subsidiaries of Berkshire Hathaway, namely National Indemnity Company (NICO) and General Reinsurance Corporation (Gen Re). NICO entered into a significant intra-group reinsurance transaction with GEICO Group effective January 1, 2014, which has had a material impact on its reported results. To provide a more meaningful picture of the sector’s underlying performance, many of the charts and ratios now focus on the listed ABA.”

Source: Aon Benfield

Topics Reinsurance Property Casualty Aon