Reinsurance Use of Alternative Capital Grew 12% in 2015: Aon Report

April 6, 2016

Alternative capital continues to make its presence felt in the reinsurance market, increasing by 12 percent during 2015 to $72 billion, while traditional capital decreased by 4 percent to $493 billion, according to a report published by Aon Benfield.

Capital from both traditional and alternative markets stood at $565 billion at Dec. 31, 2015, a drop of 2 percent from year-end 2014, said the Aon Benfield Aggregate (ABA) report, which analyzes the 2015 financial results of 27 major reinsurers.

The report also found that reinsurers’ average combined ratio in the decade since Hurricane Katrina was 92.5 percent.

“Ten years have now elapsed since the last major land-falling hurricanes in the US,” said Mike Van Slooten, co-head of Aon Benfield’s Market Analysis team.

“This has been a decade of unprecedented profitability for global reinsurers, as seen in the average combined ratio of 92.5 percent and average return on equity of 11.1 percent reported by the listed ABA companies over this period,” he added.

“The growing pressure on underlying earnings should be viewed against this backdrop, but in reality is likely to drive further M&A activity in the short to medium term,” Slotten affirmed.

Further key findings relating to the listed ABA companies include: