7% growth recorded in global reinsurance capital

Written by Adam Cadle

12/04/2021

Total capital dedicated to the global reinsurance industry measured US$658bn at year-end 2020 reflecting 7% year-on-year growth.

The rise was driven primarily by strong investment market appreciation. New capital raised both by incumbents and new entrants added to the total, but capital returns to shareholders exceeded those new investments, according to the latest Reinsurance Market Report from Willis Re.

Return on equity (ROE), nevertheless, remains under pressure.  The subset companies’ reported ROE fell from 9.7% to 2.7%, and the underlying ROE also fell from 3.2% to 1.3%.  The underlying deterioration was due to declining investment yields more than offsetting the better underlying underwriting performance.  On both a reported and underlying basis, the ROE remained well below the industry’s cost of capital.

Willis Re global CEO James Kent said: “Such a solid development of the global reinsurance industry’s capital base would hardly have been expected earlier last year, as the COVID pandemic was gathering pace.  Willis Re’s analysis provides clear evidence of the strength and resilience of reinsurance market capacity.  Reinsurers and insurers alike must contend with the challenges of low interest rates.  But, looking through the turbulence of COVID and nat cat claims, and a declining reliance on reserve releases, there is a clear improving trend in underwriting profitability.”

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