Reinsurance industry capital fell 6 per cent in the first quarter of the year, according to a report by risk adviser and broker Aon.Total global capital available to both traditional reinsurers and alternative capital was $590 billion, down from $625 billion a year earlier.The impact of Covid-19 took a toll on both claims and reinsurers’ investment portfolios, as traditional equity capital fell by 6 per cent, or $31 billion, to $499 billion.“Risk-based capital adequacy has declined, but solvency ratios generally remain strong across the reinsurance sector,” Aon reported.“Partial recovery of the asset side losses is expected in the second quarter, while claims relating to the pandemic are expected to ramp up.”The company estimated that assets under management in the alternative capital sector fell by 4 per cent, or $4 billion, to $91 billion. Aon added: “At least $15 billion of collateral is believed to be trapped as a result of recent major losses, now including Covid-19.“The reduction in the amount of capacity actually available for deployment continues to affect the retrocession market in particular.”Aon said Covid-19 had exacerbated many of the pressures that were already in the market and added a whole new layer of uncertainty.”Aon added: “There are still many variables between now and the year-end, not least the ultimate timing, scale and distribution of pandemic-related losses, the reaction of the capital markets to any further major waves of the virus and the extent of any additional major loss activity.”Aon concluded: “In this environment, the ‘modest but progressive’ tightening of reinsurance capacity that we forecasted at the beginning of the year has been accelerated.“It remains to be seen whether the volume of new capital that enters the market between now and the year-end is sufficient to influence these dynamics.”