Reinsurers have achieved reasonable returns on capital and compensated investors while increasing capacity despite catastrophes that have inflicted $190 billion in insured losses, according to Swiss Re’s Sigma, as quoted in “The Capital Challenge: Reinsurance Capacity Overshadows Market,” a special report from A.M. Best. Balance sheets have remained robus, though insured losses have dragged on earnings, according to the report.
“The challenge of managing loss accumulation from global catastrophes was evident in 2011, and since 2008 reinsurers have faced numerous hurdles due to a weakened global economy: deteriorating investment returns; more volatile investments; suppressed growth opportunities; increased client retentions and competitive pricing,” A.M. Best said.
Pricing has been competitive due to excess capacity, which has increased due to an influx of third-party capital, A.M. Best said. This is most evident in longer tail casualty classes and pressures shorter tail specialty and property classes to make up the shortfall.
“While the capital markets historically have provided capacity out on the tail for property/catastrophe risk, generally in the form of catastrophe bonds, industry loss warranties (ILWs) and other collateralized structures, it now appears investors, asset managers and bankers are showing more interest in the lower layers of catastrophe programs, as well as in other specialty and casualty classes,” A.M. Best said.
Reinsurance brokers have reported $45 billion in additional capacity has entered the reinsurance market, representing 14 percent of the current global property limit, A.M. Best said, as hedge funds, pension funds, endowments and trusts have been lured by the favorable returns, float and uncorrelated risks. “Front-line sources indicate that capital is entering methodically and precisely, not just rushing in blindly,” A.M. Best said.
Not all of the capital is dedicated to increasing capacity; a substantial amount supports investment risks, as investors have collaborated with traditional reinsurers or collateralized facilities with operational infrastructure, established relationships and the intellectual capital to succeed at building a profitable underwriting portfolio, A.M. Best said.
The top 10 continue to be the same as
Top 50 Global Reinsurance Groups, ranked by gross premium written in 2012 (in U.S. millions):
1 Munich Reinsurance Co. - $37,251
2 Swiss Reinsurance Co. Ltd. – $31,723
3 Hannover Rueckversicherung AG - $18,208
4 Lloyd’s - $15,785
5 Berkshire Hathaway Inc. - $15,059
6 SCOR S.E. - $12,576
7 Reinsurance Group of America Inc. - $8,233
8 China Reinsurance (Group) Corp. - $6,708
9 Korean Reinsurance Co. - $5,113
10 PartnerRe Ltd. - $4,712
11 Everest Re Group Ltd. - $4,311
12 Transatlantic Reinsurance Co. - $3,577
13 London Reinsurance Group Inc. - $3,319
14 Assicurazioni Generali SpA - $2,979
15 General Insurance Corporation of India - $2,776
16 XL Group plc - $2,364
17 QBE Insurance Group Ltd. - $2,265
18 MAPFRE RE, Compania de Reaseguros, S.A. - $2,256
19 The Toa Reinsurance Co., Ltd. - $2,155
20 Odyssey Re Holdings Corp. - $2,004
21 R+V Versicherung AG - $2,017
22 Tokio Marine Holdings Inc. - $1,966
23 Catlin Group Ltd. - $1,860
24 Axis Capital Holdings Limited - $1,830
25 Caisse Centrale de Reassurance - $1,719
26 MS&AD Insurance Group Holdings Inc. - $1,700
27 Amlin plc - $1,592
28 RenaissanceRe Holdings Ltd. - $1,552
29 IRB - Brasil Resseguros S.A. - $1,365
30 Arch Capital Group Ltd. - $1,282
31 Deutsche Rueckversicherung AG - $1,280
32 Aspen Insurance Holdings Ltd. - $1,228
33 White Mountains Insurance Group Ltd. - $1,179
34 Validus Holdings Ltd. - $1,154
35 Endurance Specialty Holdings Ltd. - $1,119
36 ACE Ltd. - $1,070
37 American Agricultural Insurance Co. - $955
38 Alterra Capital Holdings Ltd. - $899
39 Pacific LifeCorp - $882
40 Maiden Holdings Ltd. - $864
41 ACR Capital Holdings Pte Ltd. - $765
42 Allied World Assurance Co. Holdings, AG - $760
43 Montpelier Re Holdings Ltd. - $735
44 African Reinsurance Corp. - $648
45 NKSJ Holdings Inc. - $608
46 Milli Reasurans Turk Anonim Sirketi - $576
47 Platinum Underwriters Holdings Ltd. - $570
48 Wilton Re Holdings Ltd. - $542
49 W.R. Berkley Corp. - $509
50 Central Reinsurance Corp. - $495
