Capital up 11% at year-end 2012; aggregate CR down to 92.6%

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Global reinsurer capital totalled a record $505bn at 31 December 2012, an increase of 11% ($50bn) relative to 31 December 2011, according to the latest Aon Benfield Aggregate (ABA) report.

This calculation is a broad measure of capital available for insurers to trade risk with and includes both traditional and non-traditional forms of reinsurance capital.

Capital reported by the ABA group of 31 leading reinsurers increased by 12% ($33bn) to $313bn, driven primarily by $29.5bn of net income and $15.9bn of unrealised capital gains.

There was some evidence of capital management initiatives with dividends and share buybacks rising marginally to $16.1bn.

Further key findings of the ABA study include:

  • Gross property and casualty insurance and reinsurance premiums written by the ABA rose by 6% to $192bn, principally driven by higher pricing in loss-affected lines and territories, with a number of companies deploying new sidecar capacity for catastrophe business;
  • The P&C combined ratio stood at 92.6%, down from 105.1% in 2011, representing an underwriting profit of $11.7bn, with all but two constituents reporting positive results;
  • The contribution to the combined ratio from catastrophe losses totaled 7.5 percentage points ($11.9bn), down from 20 percentage points ($29.6bn) in 2011;
  • The benefit to the combined ratio from favourable development of prior year reserves was 4.3 percentage points ($6.8bn), down from 5 percentage points ($7.5bn) in 2011;
  • Pre-tax profits reported by the ABA companies more than doubled to $35.7bn, the highest level since the onset of the financial crisis in 2008, with all 31 constituents reporting positive results; and
  • The level of ABA engagement with third party capital has increased significantly over the last 18 months. This has mainly manifested itself in sidecar sponsorship and the formation of in-house fund management operations.