Reinsurers’ capital is on track to reach $625 billion by the end of 2024, driven by increased retained earnings and reduced investment losses.
In its latest report, AM Best revealed that dedicated reinsurance capital surged by 7% year-over-year in 2023, reaching $568 billion. The report, titled “Dedicated Reinsurance Capital Thrives in Hard Market,” forecasts an even more substantial rise in 2024.
The report highlights a notable 14% year-over-year growth in traditional reinsurance capital, which increased by $57 billion to $468 billion. Bermuda has significantly contributed to this expansion, with several Bermudian firms reporting robust operational returns. Despite this growth, traditional reinsurance capital has accounted for less than 60% of the consolidated shareholders’ equity of reinsurance companies since 2018, falling to 49% in 2023 as reinsurers diversified into primary and specialty insurance sectors.
Third-party reinsurance capital experienced a modest 3.7% growth, reaching $100 billion in 2023. This segment is expected to continue expanding, with projections estimating third-party capital to range between $105 billion and $110 billion by 2024, bolstered by the growth of catastrophe bonds and collateralized reinsurance.
AM Best anticipates total dedicated reinsurance capital will hit between $620 billion and $625 billion by the end of 2024, with traditional reinsurance capital expected to grow by 10%. The report underscores that the reinsurance market is well-positioned for growth, supported by increased retained earnings and reduced investment losses.
