Insurance industry’s capital base is growing again: Aon Benfield

Insurer capital bases have grown by 8% through the first half of 2009 after decreasing by 29% in 2008, according to Aon Benfield. 
Over the same period, reinsurer capital bases increased by 9% after decreasing by 15% in 2008, Aon Benfield’s Reinsurance Market Outlook: Resilient Without Assistance reports.
“With both reinsurance buyer and seller capital bases improving, we expect an orderly renewal of core reinsurance programs at January 1, 2010,” the report notes. “An orderly market is defined as one in which cedants can syndicate and place their desired (including 10% to 20% incremental) capacity at reasonable prices, terms and conditions.
“Of course the occurrence of catastrophe events before the January negotiations are completed can lead to changes in market conditions.”
The recovery in the equity, corporate debt and hybrid markets means that reinsurance buyers and sellers have seen their capital bases partially restored, with both generally holding much greater liquidity than they have traditionally, Aon Benfield noted.
The report adds the reinsurance market, barring any significant catastrophic events during the balance of the year, will soften globally.
“Reinsurance pricing will remain disciplined at Jan. 1, 2010,” the report reads. “Increased capacity may be taken up by cedants that did not wish to increase the size of their programs in the face of a firm 2009 reinsurance market.
“We expect reinsurer share repurchases to return to significant levels in 2010 as they are challenged to fully utilize their capital in businesses that provide the opportunity for reasonable incremental returns.”