General Insurance Article - Capital grows in reinsurance industry despite waning results

The findings of the latest Reinsurance Market Report from Willis Re show that aggregate shareholders’ funds for companies making up the Willis Re Index increased by 4% to USD 344.1 billion as at 31 December 2016.

 Taking into account capital from alternative markets and a pro rata share of capital from insurance groups where reinsurance makes up more than 10% of their total premium the revised figure is USD 449 billion, an increase over the previous year of USD 427 billion.

 According to the report, aggregate net income for companies making up the Willis Re Index reduced to USD 26.6 billion from USD 30.3 billion resulting in a reduction of the headline return on equity (ROE) of 8.0% down from 9.3% at the end of 2015.

 In the face of testing market conditions, reinsurers have continued to actively manage their capital through dividends and share buy backs, totaling USD 16.4 billion for the Willis Re Index.

 For companies making up the Subset of the Willis Re Index (i.e. companies which provide more detailed financial disclosure), the reported return on equity (ROE) fell to 8.2% from 10.2% in the previous year. When adjusted for reserve releases and normalized annual catastrophe losses, the underlying ROE for the Subset reduced to 3.3% from 3.4% the previous year.

 Rising expense ratios continued to undermine the reported ROE figures for the Subset which, using the 2007 expense ratio as a base resulted in a 2.5% reduction in reported ROE, an increase from 2.4% in the previous year.

 John Cavanagh, Global CEO of Willis Re, said: “The continued challenging conditions of the market further impacts pressure on margins. However buyers can take comfort from the fact that the market balance sheet and headline figures remain robust in the face of persistent market softening due to continued reasonable net income and measured capital management strategies.”

 Download the full report: The Willis Re Reinsurance Market Report is a biannual publication providing in-depth analysis of the size and performance of the reinsurance market. Analysis is based on the Willis Reinsurance Index group of companies. In 2016 The Index includes 37 companies from across the globe.

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