Analysis by insurance and reinsurance broking group Aon estimates that global reinsurer capital increased by almost 1%, or $5 billion in the first quarter of 2025 to $720 billion, driven by growth in traditional capital as the alternative portion remained at a record high.

In 2024, global reinsurer capital grew by nearly 7% year-on-year to a high of $715 billion, with strong retained earnings and an active catastrophe bond market driving traditional and alternative capital growth during the period.

Of course, the first quarter of this year featured the devastating and extremely costly Los Angeles, California wildfires, but despite the impact of the event, which is expected to cost re/insurers around $40 billion, the volume of capital in the reinsurance industry has expanded in the three months ended March 31st, 2025.

Of the total, record $720 billion capital level estimated by Aon, equity reported by global reinsurers increased by $5 billion, or 1% to a new high of $605 billion. This growth, according to Aon, continues to come from retained earnings of established reinsurers, and continues the recovery in capital levels witnessed since 2022, when total reinsurer capital dipped to a 10-year low of $575 billion.

“The primary drivers have been strong earnings, following the market ‘reset’ in 2023, and the reversal of unrealized losses on fixed-income securities, due largely to the “pull-to-par” effect. Growth has been partly offset by increased capital returns to investors, as reinsurers look to reward loyalty,” explained Aon.

By the end of 2024, alternative, so catastrophe bonds, collateralised reinsurance, sidecars, and other insurance-linked securities (ILS) capital, increased to a record $115 billion, driven by an extremely active year for the catastrophe bond market, which has continued into 2025 with record levels of cat bond issuance seen in both Q1 and Q2, as reported by our ILS focused sister publication, Artemis.

At the end of Q1 2025, the level of alternative capital remained at $115 billion, according to Aon’s estimate, which notes that “attractive market conditions” are “encouraging existing participants to reinvest profits and new entrants to commit funds.”

“Increased investor appetite is allowing many traditional reinsurers to expand their sidecar and/or catastrophe bond programs, enabling the deployment of additional capacity,” added Aon.

Looking ahead, Aon feels that many of the major reinsurance firms are on track to produce solid results in 2025, highlighting the fact Europe’s big four – Munich Re, Swiss Re, Hannover Re, and SCOR – have all maintained their full-year 2025 profit guidance despite the costly wildfires in Q1.

“Strong capital positions are continuing to translate into healthy risk appetites, particularly in Property and most Specialty classes, and these dynamics are expected to persist into future renewals.

“Sensitivity to major loss activity has increased and the Atlantic hurricane season will, as always, be closely watched. Early forecasts suggesting an “above average” outcome are an improvement relative to 2024.

“Extreme capital market volatility is also a downside risk, after an episode linked to changes in U.S. tariff policy in early April that saw the VIX Index spike to the third-highest level since inception in 1993,” Aon said.

 

Fuente: Reinsurance News

Enlace: https://www.reinsurancene.ws/retained-earnings-lift-global-reinsurer-capital-to-record-720bn-in-q125-aon/