Global reinsurance capital declined by 6% from year-end 2019 to end the first-quarter of 2020 at $590 billion, led by a 6% dip in traditional reinsurance and a 4% drop in alternative capital, reports insurance and reinsurance broker Aon.
The broker’s latest Reinsurance Market Outlook Report highlights a $35 billion decline in total reinsurance capital as at the end of Q1 2020, with traditional capital ending the quarter at $499 billion and alternative reinsurance capital at $91 billion.
“While traditional reinsurers saw impacts of COVID-19 that affected capital results at the end of Q1, alternative capital remains impact by approximately USD15 billion in trapped capital,” says Aon.
The chart above provided by Aon, shows that total, global reinsurance capital stood at $625 billion at the end of 2019, driven by strong growth in traditional capital after a dip in 2018.
The re/insurance broker’s recent outlook report also discusses the June and July renewals. According to Aon, capacity was generally available for insurers at the mid-year renewals, albeit with varied outcomes driven by timing, structure, and capacity constraints in peak zones.
The report says that demand for reinsurance protection remained fairly stable as a number of government-related covers were pulled, offset by some primary players looking to secure additional capacity to hedge the expectation of an above-average hurricane season.
“Despite different market dynamics than in many past renewals, insurers were able to secure needed limit in the face of already reported COVID-19 related claims, future uncertainty regarding macroeconomic trends and premium volume impact from COVID-19 for the longer term,” says Aon.
Regarding primary rate movements, Aon notes that prior to the COVID-19 outbreak in the U.S., rates were trending towards the highest increases in numerous lines seen in years. By the end of Q1 2020, auto, property, and umbrella lines were all looking at rate hikes of above 10%.
“Premium levels for the remainder of the year remain uncertain as multiple factors impact outcomes from prolonged lower usage of cars to reduced patronage in retail stores and unfilled airline seats. These dynamics will in turn fuel different needs from insurers for reinsurance protection throughout the remainder of the year,” says Aon.
Source: https://www.reinsurancene.ws/total-reinsurance-capital-declined-by-6-to-590bn-in-q1-aon/