Development of alternative reinsurance capital, so that largely handled through ILS funds or other insurance-linked securities (ILS), recovered in the second-half of 2020 according to Willis Re, ending the year at $90 billion, up 2% from the middle of the year.When reinsurance broker Willis Re last reported on global capital levels it reported that both standard and alternative reinsurance capital had shrunk by roughly 3% in the first-half of 2020.
The second-half of the year saw a strong recovery, thanks to fresh capital raising on the traditional side of the reinsurance market, as well as some new inflows to ILS automobiles, particularly for catastrophe bond funds.
Having fallen by 3% to $88 billion by the end of June 2020, alternative reinsurance capital ended in 2015 at $90 billion.
The conventional side grew much more highly, thanks to the largely personal equity backed raises of new capital and start-ups, to reach $568 billion at the end of 2020, Willis Re reports.
Total reinsurance capital reached $658 billion at the end of 2020, representing 7% growth year-on-year, Willis Re reported.
Surprisingly, while brand-new capital inflows are plainly an underlying driver of offered capability in the reinsurance market, Willis Re states that, “The increase was driven primarily by strong financial investment market appreciation. Brand-new capital raised both by incumbents and new entrants contributed to the overall, however capital go back to investors surpassed those new financial investments.”
James Kent, Global CEO, Willis Re, commented, “Such a strong development of the international reinsurance markets capital base would barely have been anticipated previously last year, as the COVID pandemic was collecting speed. Willis Res analysis provides clear evidence of the strength and resilience of reinsurance market capability.”
Alternative reinsurance capital does stay a little down year-on-year, having stood at $91 billion at the end of 2019.
The return to growth in the second-half of 2020 has likely continued through the first-quarter of 2021, suggesting a fresh measure of ILS fund and other alternative capital sources by this time may show that further lost-ground has actually been recuperated by now.