Total capital dedicated to the global reinsurance industry measured USD 559 billion at the half-year point of 2019: Willis Re Reinsurance Market Report
London, UK (Sept. 4, 2019) – Total capital dedicated to the global reinsurance industry measured USD 559 billion at the half-year point of 2019. This is an 8% increase from a re-stated USD 518 billion at year-end 2018, with strong investment markets being the main driver of the industry’s capital growth. These are findings from the latest Reinsurance Market Report from Willis Re, the reinsurance business of leading global advisory, broking and solutions company Willis Towers Watson.
The largest component of this figure is the capital of the 36 reinsurance companies tracked in the Willis Reinsurance Index, which was up 11% to USD 440 billion, principally due to falling bond yields and rising equity markets. The strong investment appreciation was a reversal of the trend noted in the year-end 2018 Reinsurance Market Report. Fresh capital backing the Convex start-up also contributed to the H1 2019 capital growth.
Willis Re conducts a more in depth analysis on a subset of reinsurers within the Index which make the relevant disclosure of natural catastrophe (nat cat) losses and prior year reserve releases. The reported RoE for this subset jumped to 13.9% from 8.5% at HY 2018, driven by strong investment gains. Excluding investment gains (which had only a minor impact in HY 2018), the RoE was 7.3%.
Normalising for nat cat losses and removing the benefit from reserve releases results in an underlying RoE of 10.8%, or 4.2% excluding investment gains. This latter figure is a small improvement on HY 2018’s 3.9% underlying RoE, or 3.3% excluding investment gains.
The subset’s combined ratio deteriorated from 93.3% in HY 2018 to 94.9% on a reported basis. This was entirely attributable to a lower pace of reserve releases and higher nat cat activity. Stripping out prior-year development and replacing actual nat cats with a normalised level, we put the underlying combined ratio at 100.5%, an improvement on HY 2018’s 101.5%.
James Kent, Global CEO, Willis Re, said: “Looking behind the headline figures reveals a positive direction of travel for reinsurers so far this year, with modest but important reductions in non-catastrophe combined and expense ratios. This improvement is supported by the positive trajectory seen in 2019 market pricing across many lines. The slowdown in reserve releases continues, however, so in the months and years ahead reinsurers will need to further realise these trends.”
Reinsurance Market Report: Introduction
Global reinsurance dedicated capital totaled USD 559 billion at half-year 2019. This is a robust 8% increase from a re-stated USD 518 billion at year-end 2018 according to Willis Re’s Reinsurance Market Report.
Now in its fifth year, the report provides in-depth analysis of the size and performance of the reinsurance industry, based on the Willis Reinsurance Index group of companies.
- Total capital dedicated to the global reinsurance industry measured USD 559 billion at the half-year point of 2019.
- This is an 8% increase from a re-stated USD 518 billion at year-end 2018, with strong investment markets being the main driver of the industry’s capital growth.
- For the subset of reinsurers who provide sufficient disclosure, the HY 2019 RoE jumped to 13.9% from 8.5% in HY 2018, driven by strong investment gains.
- Normalising this figure for natural catastrophes and stripping out reserve releases and realised gains, the underlying RoE is 4.2% compared to 3.3% calculated on a similar basis for HY 2018.
About the Report
The Willis Re Reinsurance Market Report is a half yearly publication providing an aggregate analysis of the size and performance of the global reinsurance market. The report is based on the Willis Reinsurance Index group of reinsurance companies from across the globe.
1. This allows for a change in constituents and a broader definition of capital. See Appendix 1 of the report for details on the methodology.
2. The report has slightly revised the impact of normalised natural catastrophes on RoE and has restated prior-year underlying RoEs. As originally reported, HY 2018’s underlying RoE was 3.4%.
About Willis Re
One of the world’s leading reinsurance brokers, Willis Re is known for its world-class analytics capabilities, which it combines with its reinsurance expertise in a seamless, integrated offering that can help clients increase the value of their businesses. Willis Re serves the risk management and risk transfer needs of a diverse, global client base that includes all of the world’s top insurance and reinsurance carriers as well as national catastrophe schemes in many countries around the world. The broker’s global team of experts offers services and advice that can help clients make better reinsurance decisions and negotiate optimum terms. For more information, visit willisre.com.
About Willis Towers Watson
Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
SOURCE: Willis Towers WatsonTags: reinsurance, report, Willis Re