Aon Benfield estimates that total global reinsurance capital increased by 4 percent to a record $585 billion over H1 2016.
The figure, which comprises capital from both traditional and alternative markets, shows that traditional capital rose by 3 percent to $510 billion and alternative, a 5 percent rise to $75 billion.
The report revealed that total premiums written by the Aon Benfield Aggregate (ABA) increased by 5 percent to $130 billion, with the main driver being consolidation activity.
It also showed that total investment returns benefited from significant capital gains linked to declines in interest rates.
The assumption of higher levels of asset risk stabilised the annualised ordinary investment yield at 2.6 percent, but the figure remains 40 percent below the level seen prior to the financial crisis, according the report.
Mike Van Slooten, co-head of Aon Benfield’s market analysis team, said: “The combined effects of lower-for-longer interest rates and underwriting margin compression were evident in this period.”
“Earnings have clearly become more sensitive to catastrophe losses and prior year reserve development. However, the return on equity remains attractive relative to other sectors and should be viewed in the context of a continuing decline in the cost of capital.”
