Reinsurance capital fell by 3% to USD 585 billion in 2018, the first decline since 2015, according to a report from Aon PLC on Monday.
Traditional capital decreased by 5% to $ 488 billion, as alternative capital rose 9% to $ 97 billion, Aon said.
Macroeconomic factors affecting the decline in traditional capital meant higher US interest rates, leading to unrealized losses on bond portfolios. a strengthening of the US dollar, which is the conversion currency of international capital positions; and a stock market correction during the quarter 2018.
A new accounting change also introduced significant additional volatility in reported earnings, Aon says.
Although total disaster losses in 201
Despite the downturn, Aon says that overcapacity still exists in the reinsurance market.
"Global reinsurance capital continues to be resilient to insured natural disaster losses totaling over $ 240 billion over the past two years," says Aon. "Excessive reinsurance capacity continues to exist, despite an increase in demand for reinsurance solutions globally."
If the alternative capital increased in 2018, the sector's growth has decreased, as the continued entry of new funds has been partly offset by losses from disaster events and redemption requests from investors, Aon says.
However, Aon expects growth to continue when this area of the market has completely dissolved the losses incurred over the past two years.
"Many long-term investors have had good returns over time, and the strategy of investing in insurance risk for diversification purposes in the low-interest environment is still valid, gives Aon.
Emergency bond issuance amounted to $ 9.7 billion in 2018, the second most active year on record, and the total outstanding limit is a record high of $ 30.6 billion, while "further high levels of activity have emerged during the first in the months of 2019, "Aon said.