The latest Aon Benfield Aggregate (ABA) report estimates total global reinsurer capital was $US565 billion ($747 billion) at December 31, down 2% from a year earlier.

The ABA is based on the annual financial results of 27 major reinsurers, and the reinsurer capital total comprises capital from traditional and alternative markets.

Traditional reinsurance capital fell 4% to $US493 billion ($652 billion), driven by the strengthening of the US dollar and the impact of rising interest rates on bond valuations.

Alternative capital continued to grow, up 12% to $US72 billion ($95.2 billion).

The ABA, which now covers a decade of data, shows shareholders’ funds reported by the 27 companies fell 4% to $US326 billion ($431 billion) at December 31. When calculated at constant exchange rates the total increased slightly.

“Solid earnings were generated in the absence of major insured catastrophe losses,” Aon Benfield says.

Among other findings, the combined operating ratio was stable at about 90% for the third year, property and casualty underwriting profit fell 9% to $US15.1 billion ($19.97 billion) and net income fell 12% to $US22.1 billion ($29.2 billion).

Mike Van Slooten, the co-head of Aon Benfield’s market analysis team, says the decade since the last major landfalling hurricanes in the US has been a period of “unprecedented profitability” for global reinsurers.

“The growing pressure on underlying earnings should be viewed against this backdrop, but in reality is likely to drive further merger and acquisitions activity in the short to medium term.”

Aon Benfield says April renewals continued a positive trend and demand for reinsurance increased slightly in major markets in the US and Japan, with more significant demand growth in India.

“Our outlook for the June and July… renewals period remains positive, with insurers likely to achieve improvements in pricing, terms and conditions similar to those achieved for [first-quarter] renewals,” Aon Benfield says.