Alternative property reinsurance capital up 6% to $113 billion in H1 2024: Gallagher Re

Continued strong yield gains and new inflows into the catastrophe bond and insurance-linked securities (ILS) markets pushed alternative property insurance capital up another 6% to a new record of $113 billion in the middle of this year, broker Gallagher Re said.

According to data from Gallagher Re, alternative property and casualty reinsurance capital is now 14% higher than it was in mid-2023, as the broker reported it stood at $99 billion at the end of June 2023.

Subsequently, property and casualty alternative reinsurance capital increased by 11.5% to reach another record high of $107 billion at the end of 2023, according to the broker.

Now, a further increase of almost 6% has brought the total to a record $113 billion, through June 30, 2024.

As Gallagher Re explained today, the growing capitalisation of the global reinsurance sector, which stood at $766 billion at mid-year, has further strengthened the industry’s resilience.

According to Gallagher Re, in the first half of 2024, the growth in alternative capital in property and casualty insurance outpaced the percentage growth of all other sources of reinsurance capital.

The reinsurance capital of the index of companies monitored by the broker and the largest regional and local reinsurers increased by 5.2% during this period, which is at a slower pace than the capital base of the catastrophe bond and ILS markets.

Gallagher Re said: “This growth, as well as exceptionally high reported return on equity (ROE) driven by further improvements in underwriting profitability and higher ROE, provides the reinsurance industry with a sufficient buffer to absorb losses from potential headwinds such as an active hurricane season or lower interest rates.”

Interestingly, Gallagher Re said that thanks to the exceptional returns on equity (ROE) achieved by reinsurers, “as a result of significant profitability improvements over the last two years, the industry has fully recovered losses from the lower earnings years (2017-2020) and earned a margin in excess of the cost of capital.”

According to the reinsurance broker, ROE “stabilised at an exceptional 19.6%” while the underlying figure continued to rise.

According to Gallagher Re, a subset of reinsurers tracked by the broker posted a return on equity (ROE) of 15.5% in the first half of 2024, meaning they “exceeded their cost of capital for the third consecutive year, indicating improved underlying underwriting margins and higher investment income.”

“Global reinsurers delivered another strong set of results in the first half of 2024,” explained Michael van Wegen, Head of Client & Market Insights International, Gallagher Re Global Strategic Advisory. “With ROE still comfortably above the cost of capital, reinsurers are extremely well-positioned to absorb any potential volatility stemming from, for example, natural catastrophes, financial markets or interest rates.”

The drivers of the growth in alternative reinsurance capital were increased earnings and capital inflows. According to Gallagher Re, “a large part of the growth came from catastrophe bond mandates.”

However, the reinsurance broker also noted that the reinsurance industry is still struggling to generate new business, stating: “We continue to see a lack of new entrants despite continued favourable market conditions.”