Global reinsurer capital reached $510 billion in first half

Global reinsurer capital reached $510 billion in the first half of the year, the latest Aon Benfield Aggregate (ABA) report estimates.

That estimate, as of June 30, is an increase of 1% since Dec. 31, 2012, according to Aon. The company’s calculation is a broad measure of the capital available for insurers to trade risk with and includes both traditional and nontraditional forms of reinsurance capital.

However, capital reported by the 31 leading reinsurers (the ABA) fell 1% to $313 billion, with “solid earnings being offset by more active capital management, adverse foreign exchange movements and unrealized losses on bond portfolios,” according to Aon.

Gross property and casualty (P&C) insurance and reinsurance premiums written by the ABA rose by 5% to $109 billion, with growth driven by the U.S. market, which had improving economic conditions and higher pricing in certain primary insurance lines, Aon noted.

The ABA combined ratio also improved by 1.7 points to 89.0%, driven by improved attritional loss experience and more favourable prior year reserve development.

“The ABA companies reported strong underwriting results in the first half of 2013,” Mike Van Slooten, head of Aon Benfield’s International Market Analysis team noted in a statement.

“Interest rates have begun to rise ahead of expected tapering of the Federal Reserve’s quantitative easing program, which is negative for book values in the short-term but positive for earnings in the longer-term,” he added.

“We continue to see evidence of operational restructuring and strategic repositioning, as established reinsurers react to the threats and opportunities posed by the deployment of new funds from capital markets investors.”