Global reinsurance capital has continued to build despite the record catastrophes of 2017, according to Aon Benfield.
The intermediary said that suggestions made in the wake of the third quarter catastrophes that reinsurance capital would shrink have proven to be unfounded.
In its latest Reinsurance Market Outlook report, Aon said that reinsurance capital at the end of last year stood at $605bn, up from $595bn at the end of 2016.
Alternative capital made up $89bn of this, an increase of nearly 10 percent from the year before when it stood at $81bn.
The broker said that at the April 1 renewals – which are dominated by Japanese, Indian, and Korean business – buyers found “ample capacity to meet their risk transfer needs”.
Aon acknowledged in the report that the increase in global reinsurance capital may seem “counter-intuitive” in light of the scale of losses incurred, however offered a number of explanations as to why capital continues to build.
The broker said alternative capacity has continued to demonstrate a strong appetite for reinsurance risk, with the continued supply of capital from outside of the market changing the dynamics from what reinsurers would usually expect in the wake of heavy catastrophe losses.
Alongside alternative capital, Aon said the reinsurance market picked up a relatively low proportion of the losses, which the intermediary estimates to be less than one third of the total losses.
That was a result of high retentions on the part of primary carriers, Aon said.
The broker added that a contributing factor to the increase in capital was the weakening US dollar against most currencies, which it said benefitted year-on-year results comparisons.
Favourable prior year reserve development and better than expected investment returns could also have aided some reinsurers to offset the impact of losses, the broker said.