Reinsurance dedicated capital was down by 5 percent at year-end 2018, according to Willis Re’s latest Reinsurance Market Report.
Total global reinsurance capital was reported to be $462 billion—a decrease of 10 percent compared to 2018. Approximately 72 percent of this was made up by the 32 reinsurance companies in the Willis Reinsurance Index.
The remainder of this figure was predominantly made up of alternative capital, which experienced an increase of 6 percent at year-end 2018.
Index capital was reduced by $13.7 billion, a result of the exits of Validus and XL Catlin through merger and acquisition, as well as “unrealised investment depreciation”, reported to be a result of decreasing equity markets and increasing bond yields.
Willis Re also carried out a detailed analysis of reinsurers involved in natural catastrophe losses, which calculated the return on equity (RoE) to be 4.2 percent, an improvement from 1.4 percent in 2017.
However, underlying RoE was reported to be 2.7 percent, a decrease from 2017’s figure of 3.8 percent.
Both the increase in natural catastrophe RoE and decrease in underlying RoE was attributed to the combined ratio, as the headline combined ratio for natural catastrophe losses dropped to 99.2 percent.
James Kent, global CEO of Willis Re, commented: “Overall shareholders equity figures for the Index suffered a negative impact due to unrealised investment losses, owing to external factors largely beyond the control of risk carriers, as well as shareholder buybacks and dividends.”
“The report’s findings show that the remedial actions taken by many risk carriers in 2018 were essential and we are seeing an acceleration of these actions in 2019 as companies seek improved underwriting terms and rates to drive RoEs.”
