Aon Benfield estimates that total global reinsurer capital, which comprises capital both from the traditional and alternative markets, stood at USD565 billion at December 31, 2015 – a reduction of 2% relative to the end of 2014.
Within this figure, traditional reinsurance capital decreased by 4% to USD493 billion, driven by the strengthening of the US Dollar and the impact of rising interest rates on bond valuations, while the influence of alternative capital continued to grow – increasing by 12% to USD72 billion.
The firm's latest ABA study, which now covers a decade of data, found that the shareholders’ funds reported by the 27 ABA companies* fell by 4% to USD326 billion at December 31, 2015. However, when calculated at constant exchange rates the total was shown to have increased slightly, as solid earnings were generated in the absence of major insured catastrophe losses.
Further key findings relating to the listed ABA companies* include:
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In original reporting currencies, two-thirds of the constituents achieved growth in property and casualty (P&C) premiums in 2015.
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The combined ratio was stable at around 90% for the third year running, despite another uptick in the expense ratio.
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P&C underwriting profit fell by 9% to USD15.1 billion, of which 55% was derived from favorable prior year loss reserve development.
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The total investment return declined by 25% to USD25.1 billion a yield of 2.9% (2014: 3.7%).
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Net income fell by 12% to USD22.1 billion; headline return on equity has eroded modestly, but remains resilient at 9.8%.
Mike Van Slooten, co-Head of Aon Benfield’s Market Analysis team, said: “Ten years have now elapsed since the last major land-falling hurricanes in the US. This has been a decade of unprecedented profitability for global reinsurers, as seen in the average combined ratio of 92.5% and average return on equity of 11.1% reported by the listed ABA companies over this period. The growing pressure on underlying earnings should be viewed against this backdrop, but in reality is likely to drive further M&A activity in the short to medium term.”
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