The global capital of reinsurers in 2023 reached $729 billion
The global reinsurance industry is set to grow 12% year-over-year to $729 billion in 2023 on the back of higher returns for the year, according to Gallagher Re’s reinsurance market report. This is the highest level since the reinsurance broker began analyzing the size and performance of the reinsurance market a decade ago.
The capital of reinsurance companies included in the Gallagher Re Index accounts for more than 82% of the total capital of reinsurers, which increased by 12% to $599 billion. The $64 billion increase in capital was driven by strong net income of $97 billion and a $54 billion increase in the value of unrealized investments, offsetting just over 60% of the amortization of unrealized investments reported for the full year 2022.
Meanwhile, non-life alternative capital rose $11 billion, or 11%, to $107 billion, driven in part by a $6 billion increase in catastrophe bonds.
Key drivers were retained earnings as a result of reduced loss-making activity and higher profitability, net income and mark-to-market gains.
Gallagher Re also noted that the capital adequacy of global reinsurers is not only increasing, but that target capital for reinsurance has reached a new peak in 2023 – capital growth over the past three years has outpaced premium growth as a result of both underlying demand and inflationary pressures.
Global capital of reinsurers
The global reinsurance industry’s underlying return on capital exceeded cost of capital for the second consecutive year in 2023, improving to 14.3% from 12% in 2022, mainly due to lower combined ratios and higher current investment income.
The global reinsurance industry’s return on capital was higher than cost of capital for the second consecutive year in 2023, improving to 14.3% from 12% in 2022, mainly due to lower combined ratios and higher current investment income.
According to the Gallagher Re Reinsurance Market Report 2023, which included 16 reinsurers from around the world, it also found that total return on capital increased to 20% from 7% a year ago, the highest level in a decade.
Reinsurers’ ROE is now well above the industry’s cost of capital. “Taking into account earnings in 2023, the industry generated ROE above the cost of capital for the period 2017-2023 combined,” said Michael van Wegen, head of client and market analysis at Gallagher Ru.
The Gallagher Re report said the group’s overall ratio improved by 5.7 percentage points to 88.9% in 2023 due to lower natural catastrophe losses, a better accident year loss ratio excluding natural catastrophes and a slight increase in reserves.
Reinsurers are reported to have outperformed natural catastrophe losses compared to total insured losses, which Gallagher Re estimates will be $123 billion in 2023.