Global reinsurance capital rose to $US688 billion ($934 billion) in the first half of this year, a 4% increase from the end of December, a Willis Re report says.

Growth from a re-stated base reflects strong results reported by a majority of reinsurers, with improved capital positions backed up by rising equity markets and retained profitability.

Average premium growth of 15.2% for a subset of 17 companies is also the strongest pace seen at the half year stage since Willis Re began producing the analysis in 2014.

“This was aided by price increases at both the original and reinsurance levels,” the report says. “The rebounding global economy has also led to exposure and thus premium growth.”

Combined operating ratios improved to pre-COVID levels, averaging 94.1%, as reserve releases provided a benefit and despite natural catastrophe activity reaching the highest level for a first half since the analysis reports began.

“The consensus view is that the large reserve redundancies that have been produced by older accident years are now coming to an end and recent accident years are more challenging from a reserve adequacy standpoint,” Willis Re says.

Reported return on equity (ROE) improved from 0.7% to an average 13.9%, due mainly to a “near-absence” of COVID losses. Investment gains, which were close to zero last year, added 5.1 percentage points.

The underlying ROE is calculated at 6.3%, up from 2.7% last year, but still below the industry’s weighted average cost of capital, which Standard & Poor’s puts in the 7% range.

Willis Re says the insurance linked securities (ILS) market continued to develop well in the half, with catastrophe bonds maintaining the momentum established in the fourth quarter of last year.