Reinsurance capital rebounds, 2024 could register a tepid $561b

AM Best's projected 12.2% growth in traditional reinsurance capital for 2023 may be sufficient, given potential variations based on capital deployment decisions.

In 2023, reinsurance capital rebounded due to strong technical results, unrealised gains, and higher reinvestment rates. Traditional reinsurance capital is expected to grow by 12%, aligning with projections, AM Best reported.

Third-party capital is projected to reach $100b by year-end 2023, a 4% increase from 2022. Dividend distribution policies may vary among reinsurers.

The reinsurance market strengthened in 2023, recovering from losses in 2022. Renewals in January 2023 were disorderly, solidifying the hard market. Reinsurers increased attachment points and improved underwriting margins.

Despite orderly renewals in January 2024, market conditions show no signs of softening.

Traditional reinsurers saw a 12.2% increase in capital in 2023, reversing 2022's decline. Strong underwriting and operating results, along with portfolio improvements, contributed to capital recovery. Despite projections, reinsurers may decide on capital strategies, with some opting for special dividends.

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AM Best's projected 12.2% growth in traditional reinsurance capital for 2023 may be sufficient, given potential variations based on capital deployment decisions. Third-party capital faced challenges but recovered, with CAT bond issuances reaching record highs in 2023.

Outlook

Total reinsurance capital is expected to reach $561b in 2024, slightly below the 2021 high.

This is unlikely to impact market conditions significantly, as participants maintain positions on rates and terms. Interest from capital providers remains low, reinforcing the disparity between available and deployed capital.

Private equity investors show little interest in funding start-ups or new reinsurers, with established players experiencing significant growth in 2023. Funding for new ventures, if achieved, is unlikely to soften the market.

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