A steep sell-off in equity and corporate bond markets has undone last year’s strong topline capital growth at global reinsurers, according to Willis Re.

It says significant swings in investment markets in March and April resulted in falls of between 5% and 20% in the global reinsurance capital base.

The latest Willis Re Reinsurance Market Report, a biannual publication analysing 39 global companies, says total capital dedicated to the industry rose 15% to $US605 billion ($933.73 million) last year, driven by 2019’s strong investment market performance. This was achieved despite a 3% contraction in alternative capital.

But In the year so far much of this expansion will have unwound, the report says.

“This analysis demonstrates how sensitive the global reinsurance capital base is to investment markets,” says Willis Re CEO James Kent said.

“Thankfully strong capital growth in 2019, allied to judicious investment strategies by many companies, has put the industry in a good position to weather the current volatile environment.”

Last year topline return on equity jumped to 9.7% driven by investment gains.

Underlying return on equity -- which excludes the impact of investment gains, abnormal catastrophe losses and prior-year reserve development -- fell from an already low 4.3% in 2018 to just 3.2%.

“The reinsurance sector’s underlying return on equity remains in gentle decline and is well below the industry’s cost of capital,” the report says.

The reported combined ratio increased to 100.6%, from 99.2% in 2018, and on an underlying basis -- normalising catastrophe losses and excluding prior year reserve development -- it rose to 103.1%, from 102.3% in 2018.

The ratio has been increasing every year since 2013, Willis Re says.