Alternative reinsurance capital increased by 12 per cent last year, a rate far ahead of traditional reinsurance capital.

The upward trend has taken the alternative capital total to $72 billion at the end of 2015. That’s up $6 billion year-on-year.

Sidecar and collateralised ILW capital saw double-digit increases last year, while catastrophe bonds remained strong but flat, accounting for $24 billion at the end of the year.

Meanwhile, the global reinsurer capital figure slipped 2 per cent to $565 billion, affected by the stronger dollar and the impact of rising interest rates.

These figures are reported in an analysis of the market by Aon Benfield, the global reinsurance intermediary and capital advisor for Aon.

The first three months of this year set a first quarter record for the number of catastrophe bonds issued, totalling $2.21 billion.

“The strong start to 2016 is a welcome sign to the catastrophe bond market following the more moderate volumes of Q4 2015,” noted Aon Benfield in its Reinsurance Market Outlook.

The company said that during the April renewals demand for reinsurance increased slightly in the major markets of the US and Japan, but there was a significant increase in demand in India.

India is in the process of opening its reinsurance market to foreign reinsurers, and has set rules regarding how much of a reinsurer’s business should be retained at an Indian branch office. Four major insurers, Munich Re, Swiss Re, Hannover Re and Scor, have been given initial approval by the Indian reinsurance regulator. XL Catlin has also applied to open an Indian branch.

“With a physical presence in the country, the market expects that foreign reinsurers will be able to better assess risk and reinsure risks beyond their current scope,” according to analysts at Aon Benfield.

Likewise, China is implementing changes that should bring new market players and create “reinsurance supported opportunities for insurers in the market”. New regulations may favour domestic reinsurers, and Aon Benfield reports that offshore reinsurers are applying to open branches and subsidiaries in China.

Looking at trends in the sector, analysts said: “Reinsurers continue to invest in capabilities to support ceding company growth from diversifying exposures including US mortgage credit risk, life and annuity risk and other emerging risks such as cyber liability and corporate giga-liability risks.”

During the first three months of this year catastrophe losses were historically low, at $6 billion, which is 57 per cent below the recent 10-year average of $13.9 billion. Even a median average analysis, which eliminates any potential skew of results due to outlier years, is 34 per cent lower.

Aon Benfield noted: “Our outlook for the June and July renewals period remains positive, with insurers likely to achieve improvements in pricing, terms and conditions similar to those achieved for Q1 renewals.”