According to a new report from re/insurance broker Aon, total capacity is expected to set a record as reinsurers reported strong earnings for the first half of 2021.
This is despite challenges from increased volatility, particularly related to ongoing COVID-related litigation, property catastrophe frequency, and inflationary pressures.
The broker reported that $25.1 billion of new reinsurance and retro capacity was raised in 2020/21 (both debt and equity), the majority of which has come from existing markets.
The ILS market experienced near record issuance volume, with first half issuance of USD 8.5 billion, and conditions are favourable for record issuance volume for full year 2021, eclipsing the previous record set in 2020.
Aon estimates that global reinsurer capital totalled $660 billion in the first half of this year, an increase of USD10 billion relative to the end of 2020, driven by growth in both traditional and alternative capital.
The record capital will support not only transfer of traditional risks but also nontraditional risks including U.S. Mortgage Risk transfer, Cyber, and Intellectual Property which continues to experience cautious growth.
Opportunities for growth into new risks with sufficient data to measure frequency and severity trends are likely continue, according to the broker.
Aon expects the sector non-life combined ratio to come in at 93.9%, with the benefit of previous rate increases now visibly earning through, while the strong performance of stock markets and alternative assets continued to boost investment results. Overall, the annualised return on equity is estimated at 13.4%.
