Global reinsurer capital in Q1 2024 increased for $695 bn

Insurance and reinsurance broking group Aon reports a 4% increase in global reinsurer capital during the first quarter of 2024, reaching a new high of $695 billion. This growth encompasses both traditional and alternative capital.

From the end of 2023 to March 2024, global reinsurer capital rose from $670 billion to $695 billion.

This increase resulted from retained earnings, recovering asset values, and new inflows into the catastrophe bond market.

Following challenging reinsurance renewals in 2024, which resulted in a global reset in property catastrophe pricing and retention levels, the 4/1 renewal was more predictable and generally favorable to reinsurance buyers.

Global reinsurer capital in Q1 2024 increased for $695 bn

Property catastrophe renewals in Japan reinforced the positive trends seen in the U.S. at 1/1, with pricing flat to slightly reducing, while South Korea, China and India also saw increased competition for catastrophe business, to varying degrees (see Global Reinsurance Rate for Property Catastrophe Forecasts).

The better natural catastrophe experience of the reinsurers stands in sharp contrast to overall insured natural catastrophe losses, which estimates remain elevated at $123 bn in 2023

According to Global Reinsurance Market Report, reinsurance dedicated capital totalled USD729 billion at full-year 2023, a rise of 12% versus the restated full year 2022 base. Growth was driven by both the INDEX3 companies and non-life alternative capital.

Traditional reinsurance capital grew by $23 billion in Q1 2024, reaching $585 billion. Aon attributes this growth to strong underwriting results and improved investment yields, which generated significant returns on equity.

Global reinsurer capital, 2015-2024

Global reinsurer capital

Alternative reinsurance capital also saw a 2% increase, rising from $108 billion to $110 billion by the end of March 2024.

Global reinsurance groups reported a significant improvement in underwriting profitability and ROEs in 2024, which supported an increase in their capital base to the highest level

Underlying ROEs were materially higher due to a further reduction in underlying combined ratios and higher recurring investment income. Whether viewed on a headline or underlying basis, reinsurers’ ROEs now comfortably exceed the industry’s cost of capital.

Global reinsurer capital in Q1 2024 increased for $695 bn

This marks a record level for insurance-linked securities (ILS) capital in the global reinsurance sector, driven by a surge in catastrophe bond issuance, which continued to accelerate in Q2.

Total global reinsurer capital has grown by $130 billion, or 23%, since the end of 2015. At the end of Q1 2024, it stood $20 billion higher than the previous end-of-year high in 2021.

Elevated losses from secondary perils and other events caused a decline in reinsurer capital in 2022, with traditional capital falling to its lowest level in years at $482 billion.

In 2023, reinsurers tightened terms and conditions in a hardening market, moving away from frequency losses and aggregate covers. Higher risk-adjusted rates at renewals also contributed to the recovery in capital levels in 2023.

Aon’s data indicates this recovery continued in the first quarter of 2024, pushing dedicated reinsurer capital to a new high of $695 billion.

Yana Keller  by Yana Keller