Aon Benfield Analytics estimates that total global reinsurer capital declined 6% from US$470 billion at 31st December 2010 to US$440bn at 31st March 2011: the primary driver being the high level of insured catastrophe losses in the quarter.

This calculation is a broad measure of capital available for reinsurance and includes both traditional and nontraditional forms of reinsurance capital.

In Aon Benfield's latest Aggregate (ABA) report, analysts team found that the ABA group of 28 leading reinsurers reported capital totaling US$238.3bn at the end of the first quarter – a decline of 3.4% or US$8.3bn from the end of 2010. The main contributory factors were US$4.3bn of net losses, USD2.5 billion of unrealised investment losses, US$2bn of dividend payments and US$2bn of share buy-backs.

The first quarter combined ratio rose by 38.3 percentage points to 143.7%, with US$15.1bn of catastrophe losses representing 57.1% of net premiums earned. This translated into a property and casualty underwriting loss of US$11.5bn. The total investment return reported by the ABA fell by almost a third to US$9.0bn, driven by a much lower level of capital gains.

The overall net loss of US$4.3bn reported by the ABA reinsurers for the first quarter of 2011 represented a negative return on average common equity of 1.8%. This followed a return of 10.4% or US$23.5bn for the whole of 2010.”

Mike Van Slooten, head of Aon Benfield’s International Market Analysis team, said: “The ABA entered 2011 with peak levels of capital and the decline in reported shareholders’ funds was only 3.4% in the first quarter, despite significant incurred catastrophe losses. We would expect to see this recovered in the second quarter, everything else being equal.”

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