Growth of alternative capital slows but overall capacity still outstrips demand

Reinsurance capacity continues to outpace the growth of reinsurance demand despite insurers continued efforts to optimize their view of reinsurance as capital and expand into growing lines of business and innovation, according to a new report by Aon Benfield.

The January 2017 edition of the report, called Reinsurance Market Outlook: Record Capacity Sufficient to Meet Current Demand Increase and Future Innovations, suggests that reinsurance capital continued to climb, increasing 5.3 percent to $595 billion through nine months at September 30, 2016.

While traditional reinsurance capital increased 4.7 percent during the period, alternative capital increased by only 9.6 percent, the smallest growth it has reported in five years, the report revealed.

“This result further suggests that traditional capacity is using all the tools at its disposal in order to stave off market share growth from alternative capital. The report highlights the factors impacting supply in the market including unrealized gains impact on traditional capital, new capacity developments and merger and acquisition activity,” the report said.

It also showed that insured catastrophe losses ended 2016 at $53 billion, slightly above the 10 year average for the first time since 2012 and sixth in insured catastrophe loss activity over the last 25 years. Despite this, uninsured losses continue to highlight the protection gap in coverage for emerging markets.

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