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Total Reinsurance Capital Down While Alternative Capital Is Up

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April 25, 2019

In its latest biannual Reinsurance Market Report, Willis Re said total capital dedicated to the global reinsurance industry was $462 billion at the end of 2018. The findings showed that while dedicated reinsurance capital was down 5 percent, alternative capital grew in 2018.

The largest capital component, shareholders' equity, was down 10 percent to $335.7 billion, a reversal of 2017's 8 percent growth rate. The second-largest component of total dedicated capital was alternative capital, which grew by 6 percent, Willis Re said.

The exits of Validus and XL Catlin through merger and acquisition caused a $13.7 billion reduction in Index capital, according to the findings. Willis Re also found that, of the $20.5 billion of net income, Indexed companies paid out the majority as dividends and buybacks, which reduced capital by $17.6 billion and amounted to a payout ratio of 86 percent of net income.

Willis Re said the overall decrease in Index capital was due to unrealized investment depreciation of $21.4 billion, which it believed was mainly due to falling equity markets and rising bond yields.

"Overall shareholders equity figures for the Index suffered a negative impact due to unrealized investment losses, owing to external factors largely beyond the control of risk carriers, as well as shareholder buybacks and dividends," said James Kent, global CEO, Willis Re.

He continued, "The report's findings show that the remedial actions taken by many risk carriers in 2018 were essential, and we are seeing an acceleration of these actions in 2019 as companies seek improved underwriting terms and rates to drive [returns on equity]."

The Reinsurance Market Report provides an analysis of the size and performance of the reinsurance market based on the Willis Reinsurance Index group of companies. In 2018, the Index included 32 companies from across the globe.

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