Global Reinsurer Capital at All-Time High of $540B: Aon Benfield

The latest edition of the Aon Benfield Aggregate (ABA) report estimates that global reinsurer capital totaled $540 billion as of Dec. 31, 2013, an increase of 7 percent ($35 billion) over the year, with net income up 16 percent to $34 billion, “aided by below average natural catastrophe losses and more favorable prior year reserve development. Return on equity improved to 10.6 percent

The report, which analyses the financial results of the world’s leading reinsurers in 2013, “is a broad measure of capital available for insurers to trade risk with and includes both traditional and alternative forms of reinsurance capital,” the bulletin explained.

The latest study found that capital reported by the ABA group of 31 leading reinsurers “increased by 6 percent ($20 billion) to $337 billion, driven primarily by $34 billion of net income. Repatriation of equity capital in the form of dividends and share buybacks rose by 15 percent to $20 billion, partly reflecting the increasing engagement of third party capital.”

Other key findings of the ABA study include the following:

Gross property and casualty insurance and reinsurance premiums written by the ABA rose by 5 percent to $199 billion, driven by acquisition effects and exposure growth in emerging markets.

The ABA combined ratio improved by 2.8 percentage points to 89.6 percent, with all constituent companies reporting underwriting profits.

Disclosed catastrophe losses fell by 38 percent to $7.9 billion, contributing 4.7 percentage points to the combined ratio.

Favorable prior year reserve development rose by 23 percent to $8.7 billion, benefiting the combined ratio by 5.2 points.

Net investment income was stable in dollar terms, but the yield fell by 30 basis points to 3.1 percent and is now down by a third since 2006.

ABA companies continue to extend their engagement with third party capital, principally via sidecar sponsorship and the formation of in-house fund management operations.

Mike Van Slooten, head of Aon Benfield’s International Market Analysis team, said: “Reinsurers have reported resilient results in an increasingly competitive marketplace. Most are now adapting their business models to accommodate the increasing availability of lower cost capital, thereby enhancing both their risk transfer capabilities and their offerings.