Canadian Underwriter

Global reinsurer capital continues to build to $US575 billion: Aon Benfield

March 30, 2015   by Canadian Underwriter

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Global reinsurer capital rose by 6% to $US575 billion in 2014, including a 28% increase in alternative capital to $US64 billion, according to the latest Aon Benfield Aggregate (ABA) study.

Capital reported by Aon Benfield Aggregate companies rose by 2% to $US346 billion

Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc, launched the report on Monday. It analyzed the financial results of 31 major reinsurers in 2014, including 29 publicly listed holding companies in the ABA and two U.S. domiciled subsidiaries of Berkshire Hathaway, namely National Indemnity Company and General Reinsurance Corporation.

The study found that capital reported by the ABA companies rose by 2% to $US346 billion. Net income of $US38.5 billion was offset by dividends and share buybacks of $US22.3 billion.

Further key findings relating to the 29 publicly-listed holding companies in the ABA include:

• Gross property and casualty premiums rose by 2% to $US198 billion, with reinsurance volume unchanged at $US89 billion, despite the industry’s pricing pressure;

• The combined ratio improved by 0.3 percentage points to 89.9% and p&c underwriting profit rose by 6% to $US16.8 billion;

Related: Global reinsurers report combined ratio of 90.3% for first half of 2014: Aon Benfield

• Net catastrophe losses declined from 5.6% to 3.8% of net premium earned and were well below the long-term average;

• Support from the favorable development of prior year reserves rose by 7% to $US8 billion, equivalent to 4.8% of net premium earned;

• Return on equity was unchanged at 11.1%, based on net income attributable to common shareholders; and

• Reinsurers are incorporating material alternative capital (through ILS, sidecars and asset management mandates) to lower their cost of underwriting capital. [click image below to enlarge]

Global reinsurer capital rose by 6% to $US575 billion in 2014

“Sector consolidation is underway as companies look to achieve the advantages of scale and diversification, one of the drivers being enhanced access to alternative capital,” said Mike Van Slooten, head of Aon Benfield’s international market analysis team, in a statement.