Reinsurance buyers continue to secure protection at accretive cost of capital terms despite a reduction in global reinsurer capital through 9M2018, says Aon's Reinsurance Solutions in its January 2019 edition of the "Reinsurance Market Outlook: Value Proposition to Buyers Remains High Despite Interesting Market Dynamics".
Global reinsurance capital overall fell 2% since yearend 2017 from $605bn to $595bn, says the report which provides a comprehensive assessment of the key market variables that will affect reinsurance buyers in future 2019 renewals.
Traditional capital saw a decrease of 4% in part driven by rising interest rates and the strengthening US dollar, while total alternative capital rose 11% to $99bn—an increase of $10bn since the prior yearend.
Reinsurance demand showed slight increases in traditional products and lines driven by regulatory requirements, continued attractive market dynamics for buying, and recent losses in non-peak territories that have advocated for more robust coverage for these perils; however even with this increase, supply continues to outstrip demand.
Data quality in all markets continues to improve and has meant continued refinement in pricing and rate change with both being driven even more by individual client, line, and territory experience.
Insured catastrophe losses over the past two years aggregate to approximately $230bn. While 2017 created a new peak at approximately $147bn, 2018 losses alone are currently estimated at $85bn, 47% higher than the 2000-2017 average of $D56bn.
As the market continuously looks for new ways to deploy capital, further analysis continues on a number of evolving risks including familiar ones to the market (flood, cyber, and government de-risking) as well as those that are earlier in development cycles (sharing economy, food borne illness, and longevity and pension shortfalls).
Looking forward to April renewals, Aon expects similar market dynamics to 1 January given the composition of the renewing business.