Dedicated reinsurance capacity reaches $568bn but spike may be short-lived

Written by Adam Cadle

23/08/2022

Dedicated reinsurance capacity in 2021 increased to $568bn, driven by an increase of nearly 11% from traditional reinsurance capacity providers, according to AM Best.

However, the ratings agency said the spike may be short-lived given expectations for depressed investment markets, continued geopolitical turmoil and a potential decline in global gross domestic product.

AM Best said the expectation for 2022 is that total dedicated capital will slide back after a decade of year-over-year increases, driven by reductions in traditional reinsurance capital. "Although underwriting returns for many companies have been close to break even in recent years, capital levels grew through investment gains and inexpensive debt financing; the start of 2022 has seen a reversal of most of these conditions," it said.

“Although AM Best expects headwinds in the capital and investment markets to continue in 2022, dragging down traditional capital levels, some of these losses likely will be offset by underwriting gains,” Dan Hofmeister, senior financial analyst at AM Best, added.

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