Total capital in the global reinsurance industry fell by 5% to $462bn (£400.8bn) over 2018 after unrealised investment losses and mergers and acquisitions (M&A).
That is according to a new index by Willis Re, which shows that shareholder equity in the 32 reinsurance companies studied declined by 10% to $335.7bn.
This reversed the 8% of equity growth recorded in 2017, while it was also found that alternative capital grew by 6% last year.
"Overall shareholders equity figures for the index suffered a negative impact due to unrealised investment losses, owing to external factors largely beyond the control of risk carriers, as well as shareholder buybacks and dividends," said Willis Re CEO, James Kent.
Index capital reduced by $13.7bn after the exits of Validus and XL Catlin through M&A last year.
But the overall capital decrease in the index was due to unrealised investment depreciation of $21.4bn, mainly thanks to failing equity markets and rising bond yields.
Companies paid out the majority of their $20.5bn in net income as dividends and buybacks, which together reduced index capital by $17.6bn.
The researchers also conducted an in-depth analysis on a subset of firms that made disclosures related to natural catastrophes (nat cat) losses and prior year reserve releases.
This showed that the subset's reported return on equity (RoE) recovered from the nat cat-affected 1.4% recorded in 2017 to reach 4.2% last year.
Normalising for a 4% nat cat loss, and removing the benefit of reserve releases, resulted in an underlying RoE of 2.7% for the subset, compared with 3.8% in 2017.
The main driver of the improvement in RoE and drop in underlying RoE was the combined ratio. The headline combined ratio for the subset recovered from 2017's 107.4% to 99.2%.
However, once the 4.6 percentage points of reserve releases are removed, along with 8.6 percentage points of nat cat losses, the subset had an ex-nat cat accident year combined ratio of 95.3%, compared with 94.6% in 2017.
"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 RoEs," Kent added.