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Heavy catastrophe losses trimmed 3% from total global reinsurer capital in 2011, according to new analysis released Wednesday by Aon Benfield, the global reinsurance intermediary of London-based Aon P.L.C.
The Aon Benfield Aggregate report, which analyzes the year-end financial position of 28 global reinsurers, estimates total global reinsurer capital at $455 billion as of Dec. 31, 2011, down from the $470 billion recorded a year earlier. While gross property/casualty premiums written by the reinsurers included in the ABA rose by 11.4% to $136 billion in 2011, the rise was offset by poor underwriting results. Spurred by $26 billion of natural catastrophe losses, the group's combined ratio deteriorated by 13.5 percentage points to 108.2%.
Firms with the largest exposures to the New Zealand earthquakes and the Japan earthquake and tsunami fared worst, according to Aon Benfield.
Investment yields also dipped in 2011, falling to 3.7% for the year compared with 4.6% recorded in 2010. However, the group's direct exposure to sovereign debt issued by Portugal, Italy, Ireland, Greece and Spain remains low and is restricted to a handful of ABA constituents, the report said.
Mike Van Slooten, head of Aon Benfield's international market analysis team, said the sector's financial numbers serve to validate its importance to insurers.
“The reinsurance sector remains strong after a testing year in 2011 and continues to provide very efficient underwriting capital to insurers,” Mr. Van Slooten said in a statement. “The volatility sustained by reinsurers was substantial and materially improved the earnings and capital reported by insurers affected by unusual frequency and severity of events occurring in 2011. The value proposition of reinsurance has rarely been so clearly demonstrated.”