Re capital rises by a quarter as earnings enjoy sharp turnaround

Global reinsurance capital grew by 24% last year despite a softening market, AM Best reports.

Modest catastrophe losses, favourable loss-reserve development and a significant rise in asset values helped reinsurers’ recovery.

The report, called ‘Global Reinsurance – 2009 Financial Review’, also revealed:

• US reinsurance and Bermuda market companies reported a solid combined ratio of 85.8% in 2009, better than the 2008 result of 93.6%;

• the European ‘Big Four’ – Munich Re, Swiss Re, Hannover Re and SCOR – all reported stabilised results for their property/casualty reinsurance segments in 2009;

• the financial market’s recovery helped to propel investment returns and security valuations, which further bolstered the global reinsurance segment’s total return measures for the year; and

• 1 January 2010 renewals were mostly orderly, as the perception of excess reinsurance capacity limited opportunities for rate increases to just a few loss-exposed lines.

The report stated: “Capital increased an astounding 24% from the previous year, when capital positions were beaten down largely by the global financial crisis.

“Earnings in 2009 turned around sharply from the previous year, when investment losses coupled with catastrophe losses from Hurricane Ike hammered global reinsurers’ total return measure.”

In more good news for the reinsurance industry, the Aon Benfield Aggregate (ABA), which analyses the financial results of 30 global reinsurers, revealed that shareholders’ funds even surpassed their pre-credit crisis level of 2007. Funds reached $210bn – a rise of 28% on full-year 2008.

The report also highlighted that gross written premium underwritten by the ABA group of reinsurers fell by 1% in 2009 to $133bn. The aggregate combined ratio improved by 4.8% to 90.9%, driven by a lower loss ratio.

Contributions to the underwriting result from prior-year reserve releases totalled 3.3%, compared with 4.2% in 2008.