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After a 7% fall in 2022, reinsurance capacity returned to growth in 2023 with an increase of 7%. The decline in capacity in 2022 was due to a rise in natural catastrophe claims, which dried up market capacity, as well as inflation and the volatility of reinsurers' performance in recent years.
This loss of capacity was quickly offset in 2023, with the volume of capital invested reaching 568 billion USD. This is close to the peak level of 571 billion USD reached in 2021. According to AM Best, capacity was strengthened in 2023 thanks to :
- the improvement in the general environment for the industry,
- the increase in retained earnings,
- the reduction in investment losses,
- the growth in capacity of major players in the Bermuda and US markets following the achievement of solid operating returns. This is particularly true of National Indemnity, a subsidiary of the US group Berkshire Hathaway, and Bermuda's Renaissance Re and Everest Group, which injected new capital in 2023 to finance their growth. Also according to AM Best, Bermudan reinsurers outperformed in 2023 with equity up 33.7% and an average ROE of 23%,
- the improvement in the operating results of the major European reinsurance groups,
- the attractiveness of the catastrophe bond market.
Reinsurance capacity trends: 2013-2024
| 2013 | 2018 | 2022 | 2023 | 2024 E | 2013-2024 evolution | |
|---|---|---|---|---|---|---|
| Traditional reinsurance capacity | 320 | 341 | 434 | 468 | 515 | 60.94% |
| Alternative reinsurance capacity | 48 | 95 | 96 | 100 | 110 | 129.17% |
| Alternative reinsurance share | 13% | 22% | 18% | 18% | 18% | 34.93% |
| Total capacity | 368 | 436 | 530 | 568 | 625 | 69.84% |
E: estimate
Source: AM Best
Traditional and alternative reinsurance capacity in 2023
Traditional and alternative capital improved throughout 2023 as traditional reinsurers raised funds and launched development support programs. At the same time, investors injected alternative capital into the catastrophe bond market.
In 2023, traditional capital amounted to 468 billion USD, an increase of 7.8% over one year. This alone accounts for 82% of total market capacity.
After stagnating at 96 billion USD in 2021 and 2022, alternative capital grew by 4% reaching 100 billion USD in 2023.
The 2024 projections point to a 57 billion USD injection of additional capital to reach 625 billion USD. Traditional capital is expected to reach 515 billion USD, while alternative market capital is expected to fluctuate between 105 billion USD and 110 billion USD.
