First-quarter global reinsurance capital decreased about 6% from the year-earlier period to $590 billion, and there was a “modest but progressive” tightening of capacity at midyear renewals, according to a report Tuesday from Aon PLC.

Total reinsurer capital stood at $625 million at the end of 2019, data from the report showed.

The change included a 6% drop in traditional reinsurance capital in the first quarter to $499 billion, and a 4% drop in alternative capital to $91 billion, Aon said.

The broker said deployed capacity continued a gradual tightening trend.

“In this environment, the ‘modest but progressive’ tightening of reinsurance capacity that we forecasted at the beginning of the year has been accelerated,” Aon said.

Exclusionary policy language changes, such as for communicable disease, gained traction at midyear renewals, Aon said.

“The most prevalent discussion for all major renewals was the inclusion of communicable disease language on property catastrophe contracts. A variety of language ended up being adopted, with some insurers electing to write their own verbiage,” Aon said.

Wildfire exposures are also seeing some pressure. “California-exposed industries continue to experience significant pricing and coverage pressure, and wildfire exposures in other venues are also seeing capacity reductions,” Aon said, adding  “bespoke” wildfire solutions are available in the reinsurance market.

Property catastrophe losses through the first half of 2020 maintained near median levels of activity with approximately $26 billion in losses accumulated, Aon said

The first half of 2020 saw eight individual catastrophe events that caused more than $1 billion in insured payouts. Six occurred in the United States, all related to severe convective storms, including losses driven by tornadoes, hail or straight-line winds, Aon said.

The combined cost of the six billion-dollar U.S. insured events was estimated at nearly $12 billion.

Fallout from the COVID-19 outbreak has “undermined” earnings for 2020, Aon said. 

The combined pre-tax loss for the 18 companies in Aon’s Reinsurance Aggregate that reported was $3.8 billion and the average combined ratio was 103.2%. This included $3 billion of COVID-19 related losses recognized, with claims relating to the pandemic expected to “ramp-up” in the second quarter.