Canadian Underwriter
News

2015 Q1 reinsurance capital up 1% to US$580 billion from end of 2014


July 3, 2015   by Canadian Underwriter


Print this page Share

Reinsurance capital inched up 1% to US$580 billion for the first quarter of 2015 compared with the end of 2014, in part aided by continued light catastrophe activity, notes a new report from Aon Benfield.

“There were positive and negative factors behind the overall increase through the quarter,” states Reinsurance Market Outlook June and July 2015 Update.

Positive elements were continued growth in the contribution from alternative capital and from government schemes. Partly offsetting were a contraction in the shareholders’ funds of Aon Benfield Aggregate companies and a number of catastrophe bond maturities caused a reduction in the amount outstanding at March 31, the report explains. [click image below to enlarge]

 Aon Benfield says reinsurance capital reached US$580 billion for the first quarter of 2015

“June and July 2015 catastrophe reinsurance program renewals include many U.S. hurricane exposed insurers, most Australia and New Zealand exposed insurers, many Asia ex-Japan exposed insurers, and a meaningful component of Latin American exposed insurers,” the report states.

Overall, U.S. demand increased materially for the second consecutive year, with the majority of the increase coming from Florida and other coastal risks, the report notes. There are additional demand increases in Chile, Colombia and Australia/New Zealand placements.

“The remainder of 2015 has relatively fewer renewals of major programs, and we expect similar results for these renewals as the supply and demand trends described above continue,” Aon reports.

The report shows that a record US$1.7 billion of catastrophe bonds were issued in the first quarter of 2015 and another US$3.0 billion issued in the second quarter. “The quarter followed the most active first quarter to date, with issuance for the first half of the 2015 calendar year reaching US$4.66 billion – a 21% decreased over the same period in the record prior year,” the report states.

“Investors continue to show broad interest in insurance-linked securities, however, asset managers are demonstrating discipline in their capital deployment,” the report notes. “Total alternative capital was up modestly in Q1 2015 and remains impactful to the overall market for risk transfer, as more traditional reinsurers incorporate into their capital structures and enhance offerings to their primary insurer customers,” Aon points out.

The report shows alternative capital for 2015 Q1 was US$66 billion, an increase of more than 3% since year-end 2014. “Catastrophe bonds decreased slightly to US$22.1 billion, while sidecars increased US$1 billion to US$7.6 billion and collateralized reinsurance continued to climb gaining US$3 billion in Q1 2015, ending the period at US$32.7 billion.”

“Overall, first-half natural disaster losses were below normal from the recent 10-year average (2005-2014) for the third consecutive year,” notes the report.

“As of this writing, the roughly US$14 billion in insured losses thus far in 2015 are 58% less than the recent average of US$33 billion. Global losses were below average for all major peril types, with the exception of winter weather, which was particularly harsh across the central and eastern United States,” it states.

With regard to insured losses, “should current trends from the first half of the year continue, there are currently no regions of the world on pace to surpass their 10-year average in 2015,” the report notes. [click image below to enlarge]

Aon Benfield reported natural disaster losses of US$14 billion for the first half of 2015

“The value proposition offered to insurers of low-volatility lines of business such as auto and healthcare, as well as primary risks currently financed through captives, remains high, though we believe risk appetites of these capital providers may broaden over time to support additional deployment,” it notes.

“Insurers have embraced growth opportunities by more fully accessing accretive reinsurance, as private insurers have utilized the lower risk transfer margins to actively reduce government participation in catastrophe exposed regions,” the report states. “We anticipate even greater reinsurance-supported growth to materialize for insurers exploiting immediate demands for new classes of underlying insurance risks.”


Print this page Share

Have your say:

Your email address will not be published. Required fields are marked *

*