Reinsurers capital seen to reach $625 by end of year

Thanks to higher retained earnings and lower investment losses.

In 2023, total dedicated reinsurance capital surged by 7% year-on-year (YoY) to $568b, with an even larger increase anticipated for 2024, according to an AM Best report. 

The report, titled “Dedicated Reinsurance Capital Thrives in Hard Market,” highlighted a significant YoY growth in traditional reinsurance capital, which rose by $57b, or 14%, to $468b.

Bermuda played a key role in this growth, with various Bermudian companies reporting strong operating returns. Despite the increase in traditional reinsurance capital, it accounted for less than 60% of the consolidated shareholders’ equity of reinsurance writers since 2018, dropping to 49% in 2023 as reinsurers expanded into primary and specialty insurance lines.

Third-party reinsurance capital also saw modest growth, increasing by 3.7% to $100b in 2023. This growth is expected to continue, with third-party capital estimated to reach between $105b and $110b by 2024, driven by the expansion of catastrophe bonds and collateralized reinsurance.

Looking ahead, AM Best projects total dedicated reinsurance capital to reach between $620b and $625b by the end of 2024, with traditional reinsurance capital expected to rise by 10%. The report suggests that the reinsurance market is well-positioned to grow despite potential losses, thanks to higher retained earnings and lower investment losses.