Total capital dedicated to the global reinsurance industry was down 5% at the end of 2018, according to new data from Willis Re.
The company found that total reinsurance dedicated capital was $462 billion at the year’s end. The largest component of that figure was the total shareholders’ equity of the 32 reinsurance companies tracked by the Willis Reinsurance Index. Shareholder equity was down 10% to $335.7 billion, reversing growth of 8% in 2017, Willis Re said.
Index capital fell by $13.7 billion due to the exits of Validus and XL Catlin through mergers and acquisitions, Willis Re said. Companies paid out most of the $20.5 billion of net income tracked by the index as dividends and buybacks, reducing index capital by $17.6 billion – a payout ratio of 86% of net income. The overall decrease in index capital was driven by unrealized investment depreciation of $21.4 billion, mainly due to failing equity markets and rising bond yields, Willis Re said.
“Overall shareholder 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 of Willis Re. “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 RoEs.”
