Global reinsurer capital grew 11% last year to about $US505 billion ($483.07 billion) at December 31, according to a report by Aon Benfield.

It offsets a small drop following catastrophe losses in 2011, when the figure was $US455 billion ($435.24 billion), down 3% on the previous year.

The increase was driven by “solid earnings” from traditional reinsurers, unrealised investment gains taken directly to equity and a continued flow of new capital, Aon Benfield says.

Hedge and pension funds are increasingly attracted to reinsurance because it performs well amid low interest rates, according to the report.

The 31 companies in the Aon Benfield Aggregate (ABA) reported funds of $US313 billion ($299.41 billion), up 12% on 2011.

The ABA wrote $US192 billion ($183.66 billion) of gross property and casualty premium last year – up 6% – of which $US100 billion ($95.66 billion) was reinsurance.

This growth is driven by price rises in loss-affected lines and territories, and higher demand for capital support in the Asia-Pacific region.

Pre-tax profit more than doubled to $US35.7 billion ($34.15 billion) on lower insured catastrophe losses.

Low interest rates have hit reinsurers’ earnings from invested funds and increased competition, Aon Benfield Head of International Market Analysis Mike Van Slooten says.

“Diversified yield-seeking investors are now adding material pressure [with price and value competition] and benefits [lower-cost underwriting capital] to the reinsurance market,” he said.

“We expect material changes to the capital structure of the largely equity-financed reinsurance market as material new flows of capital are integrated into reinsurance underwriting capital.”