Reinsurance capital globally hit a new peak of $595 billion for the first nine months of 2016, which is 5.3 per cent higher than the total at the end of 2015.

That is $20 billion higher than the record full year figure for 2014.

The ten-year median average for global insured losses is $52 billion, with last year tentatively estimated to be slightly higher at $53 billion.

“Reflecting a new peak in supply, capacity continues to outpace the growth of reinsurance demand despite insurers continued efforts to optimise their view of reinsurance as capital and expand into growing lines of business and new innovation,” stated Aon Benfield in its Reinsurance Market Outlook, published this week.

The nine-month figures show that traditional reinsurance capital increased 4.7 per cent, while alternative capital growth was up 9.6 per cent, which is the smallest growth reported in the last five years.

“Overall demand increased for the industry, but growth has been isolated to few regions and lines of business,” stated Aon Benfield.

“For January renewals, some insurers in the US and Europe looked to secure additional property catastrophe capacity as terms and conditions continued to move in their favour or they looked to meet new regulatory requirements and evolving rating agency thresholds.”

New lines of business that have seen growth are mortgage and cyberliability.

There was also a move by many insurers and reinsurers to lock in coverage on a multiyear basis.

As has been noted by the likes of Munich Re in recent weeks, the protection gap in coverage for insured losses in emerging markets remains significant.

While insured catastrophe losses edged up last year, making it the sixth highest for loss activity in the past 25 years, the biggest contribution to losses were severe convective storms, floods and fire, which are perils typically resulting in lower ceded losses for reinsurers to shoulder.

Alternative capital stood at $78 billion for the first nine months of 2016. An analysis of the sector shows the continuation of a trend that started about five years ago where collateralised reinsurance structures have emerged as the most favoured vehicle for alternative capital.

In its report, Aon Benfield said that certain maturing catastrophe bods did not renew during 2016 and as a result, new issuance fell to $6 billion by the end of September, compared with $6.9 billion in 2015.

Looking at the year ahead for the reinsurance market, Aon Benfield noted: “The pick-up of mergers and acquisitions activity in the fourth quarter and potential interest-rate increases could signal potential capacity restrictions.

“Our expectation is that these impacts will be slow to manifest and enough excess capital remains in the market to continue the trend for better terms and conditions for insurers seen at January 2017.”