Log In

Reset Password

Reinsurance capital falls 6%

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.”

Capital slip: reinsurance capital fell in the first quarter (Graph by Aon)

You must be Registered or to post comment or to vote.

Published July 21, 2020 at 9:00 am (Updated July 21, 2020 at 9:02 am)

Reinsurance capital falls 6%

What you
Need to
1. For a smooth experience with our commenting system we recommend that you use Internet Explorer 10 or higher, Firefox or Chrome Browsers. Additionally please clear both your browser's cache and cookies - How do I clear my cache and cookies?
2. Please respect the use of this community forum and its users.
3. Any poster that insults, threatens or verbally abuses another member, uses defamatory language, or deliberately disrupts discussions will be banned.
4. Users who violate the Terms of Service or any commenting rules will be banned.
5. Please stay on topic. "Trolling" to incite emotional responses and disrupt conversations will be deleted.
6. To understand further what is and isn't allowed and the actions we may take, please read our Terms of Service
7. To report breaches of the Terms of Service use the flag icon