Reinsurer capital dipped in 2015; sector remains solid
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Global reinsurer capital dropped about 1.7% from its Dec. 31, 2014, level to $565 billion at the end of 2015, according to a report issued by Aon P.L.C.'s Aon Benfield unit.
The Aon Benfield Aggregate said that traditional capital fell by 4% to $493 billion, driven by the strengthening of the U.S. dollar and the effect of rising interest rates on bond valuations. The report said that alternative capital has continued to increase, albeit at a slower pace than before, with the total rising about 12% to $72 billion by the end of 2015.
“The operating performance of major insurers and reinsurers remained solid, aided by below average insured catastrophe losses, economic recovery in the United States and exposure growth in emerging markets,” said the report.
“Ten years have now elapsed since the last major land-falling hurricanes in the U.S.,” said Mike Van Slooten, co-head of Aon Benfield's market analysis team, in a statement accompanying the report. “This has been a decade of unprecedented profitability for global reinsurers, as seen in the average combined ratio of 92.5% and average return on equity of 11.1% reported by the listed ABA (Aon Benfield Aggregate) companies over this period. The growing pressure on underlying earnings should be viewed against this backdrop, but in reality is likely to drive further M&A activity in the short to medium term.”
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