Overall, traditional dedicated reinsurance capital for year-end 2020 was estimated at USD 397 billion by Guy Carpenter and A.M. Best, a marginal increase on year-end 2019. Favorable valuations of asset levels and capital initiatives saw capital levels recover from the decline witnessed at mid-year 2020. However, reinsurers struggled to achieve positive returns on equity due to the combined impacts of COVID-19 and catastrophe losses. Dedicated capital also benefited from new capital formations.
“While there is no doubt that in 2020 the reinsurance market was impacted on multiple fronts by property losses, COVID-19 and continuing strain in the casualty market,” said Lara Mowery, Global Head of Distribution at Guy Carpenter, “it is a credit to the financial robustness of our marketplace that reinsurers were largely able to navigate through these challenges, respond to changing conditions and define market strategies for management and investors.”
This resilience was also evident in the insurance-linked securities arena, which once again demonstrated its low correlation features. Overall, catastrophe bond offerings continued to attract significant capital while syndicated sidecar and collateralized reinsurance strategies experienced limited new inflows of capital. January 1 allocations were complicated by year-end loss reserve “buffering” related to COVID-19 and the high frequency of mid-size catastrophe losses in the United States, creating uncertainty regarding the level of capital available for new and renewing placements.