Best’s Market Segment Report: Dedicated Reinsurance Capital Thrives in Hard Market

Total dedicated reinsurance capital in 2023 jumped by 7% to USD 568 billion, with an even larger increase projected for 2024, according to a new AM Best report.

The Best’s Market Segment Report, “Dedicated Reinsurance Capital Thrives in Hard Market,” is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Other reports, including AM Best’s ranking of top global reinsurance groups and in-depth looks at the insurance-linked securities, Lloyd’s, life/annuity, health and regional reinsurance markets, will be available during August and September.

According to this report, traditional reinsurance capital increased year over year by approximately USD 57 billion, or 14%, to USD 468 billion in 2023. Aside from Berkshire Hathaway’s National Indemnity, the most substantial capital growth was generated in Bermuda, owing to robust operating returns reported by various Bermudian companies. AM Best expects that the reinsurance market will continue to thrive throughout 2024; total dedicated reinsurance capital for year-end 2024 is estimated at between USD 620 billion and USD 625 billion. The estimate factors in a 10% rise in traditional capital. Despite the increases, since year-end 2018, traditional reinsurance capital has been less than 60% of the consolidated shareholders’ equity of the groups identifying as reinsurance writers. This figure dropped to 49% of shareholders’ equity in 2023, as reinsurers continued to expand into primary and specialty insurance lines.

Third-party reinsurance capital saw a modest 3.7% increase in 2023 to USD 100 billion, according to the report. AM Best works in conjunction with Guy Carpenter to estimate the total amount of capital supporting the reinsurance industry. AM Best estimates traditional reinsurance capital; Guy Carpenter estimates third-party capital. The third-party reinsurance capital estimate for 2024 is between USD 105 billion and USD 110 billion; this is driven by healthy growth in catastrophe bonds and collateralized reinsurance.

“Capital in the industry has expanded quickly, due to higher retained earnings and lower mark-to-market investment losses. Additionally, the absence of startup reinsurers has allowed traditional reinsurers to maintain their market shares without compensating with softening conditions. The reinsurance market seems well-positioned to absorb a reasonable level of losses and still grow capital,” said Dan Hofmeister, associate director, AM Best.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=345887.

A video discussion of this report also is available at http://www.ambest.com/v.asp?v=ambgrdedicatedcapital824.

For future global reinsurance reports ahead of Rendez-Vous de Septembre, please visit Best’s Research.

Lastly, AM Best will host its annual reinsurance market briefing at Rendez-Vous de Septembre on Sept. 8, 2024, at 10:15 a.m. (CEST) in Monte Carlo. For more information, please visit http://www3.ambest.com/rd/rd.aspx?rd=RVDS2024.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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