The combined capital of reinsurers worldwide reached a record $480bn in the first six months of this year, according to figures published by Aon Benfield yesterday.
The total, which features in the consultancy's latest six-monthly analysis of the global reinsurance sector, the Aon Benfield Aggregate report, represents an increase of 5%, or $25bn, from the total capital reported six months earlier on December 31.
Aon Benfield's calculation is based on a measurement of the capital available for insurers to trade risk. It includes both traditional reinsurance capital and non-traditional reinsurance forms of risk transfer such as catastrophe bonds.
Mike Van Slooten, head of Aon Benfield's International Market Analysis team, said: 'In stark contrast to the prior year, the relatively low level of insured catastrophe losses in the first half of 2012 allowed most ABA companies to report good earnings and consequent capital growth.'
The reported capital of the 31 publically-reporting firms which make up Aon Benfield analysis rose by 6%, or $15bn, to $286bn between December 31 2011 and June 30. This was driven by $14.5bn of common net income and $8.6bn of unrealised capital gains.
In total, the 31 firms wrote gross property & casualty and reinsurance premiums totalling $92bn in the first half of 2012 - 6% more than in the same period a year earlier. Net premiums rose by 5.3% to $76.3bn.
According to the report, the main driver of this premium growth was increased pricing, particularly in lines of businesses affected by losses. A number of companies deployed sidecar capacity for catastrophe business, which involves investors taking on the risk and return of a group of insurance policies.
The combined ratio of the 31 firms - their losses and expenses divided by premiums earned - stood at 90.1%, compared to 117.8% in the first half of 2011. This provided an underwriting profit of $6.6bn, with all but one firm reporting positive results.
Significantly, natural catastrophe losses contributed just $1.6bn (2.5 percentage points) to the combined ratio, compared to $19.6% (31.8 percentage points) in the first half of 2011.