Reinsurer capital strong despite 2011 catastrophe losses
by Gill Montia
The capital reported by 28 leading reinsurers reached an all-time high of $251 billion at the end of 2011, according to the latest Aon Benfield Aggregate (ABA) report, which analyses the financial position of the world’s leading reinsurers.
Total global reinsurer capital was down 3% over the year, to $455 billion, but showed an increase of 1.7%, or $4.2 billion, from the end of 2010, a reduction of 3.4% in the first quarter of 2011 having been followed by growth of 1.7%, 1.1% and 2.3% in the three subsequent quarters.
The primary contributors to ABA capital growth were net income of $11.7 billion and unrealised capital gains of $5 billion, according to Aon Benfield Analytics.
The main offsetting factors were dividends and share buybacks totaling $13.7 billion.
Across the ABA as a whole, return on average common equity declined from 10.4% in 2010 to 4.6% in 2011, driven by the higher level of catastrophe losses and the relative absence of realised and unrealised investment gains.
Further key findings of the ABA report include:
1. Gross property and casualty premiums written increased by 11% to $136 billion with contributory factors including acquisitions, reinstatement premiums and organic growth in certain primary insurance lines.
2. The combined ratio rose by 13.5% to 108.2%, including a contribution of 23.4% from $26 billion of natural catastrophe losses.
3. The non-life underwriting result fell by $14.2 billion to a loss of $9.1 billion, despite a positive contribution of $6.5 billion from prior year reserve releases
4. Direct exposure to sovereign debt issued by Portugal, Italy, Ireland, Greece and Spain remains low and is restricted to a handful of ABA constituents.
Mike Van Slooten, head of Aon Benfield’s international market analysis team, comments: “The reinsurance sector remains strong after a testing year in 2011 and continues to provide very efficient underwriting capital to insurers.”