Prepared by The Aon Centre for Innovation & Analytics

Advisory Committee on Risk Sharing 

Mechanisms

June 1, 2016
Agenda

Section 1 Property Terrorism Key Metrics Analysis – Q4 2015

Section 2 Insurance and Reinsurance Capacity

Section 3 Discussion Topics
Section 1: Property Terrorism Key Metrics 

Analysis
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Section 2: Insurance and Reinsurance Capacity
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Change in global reinsurer capital

Source: Individual company reports, Aon Benfield Analytics 

$410B $340B $400B $470B $455B $505B $540B $575B $565B

-17% 18%

18% -3% 11% 7% 6% -2%

2007 2008 2009 2010 2011 2012 2013 2014 2015

 Global reinsurer capital totalled USD565 billion at year end 2015, a reduction of 2 percent since the 

end of 2014

 Two factors drove this decrease:

– Strengthening of the US dollar resulting in a reduction of capital on conversion from other 

currency

– Rising interest rates on bond valuations, contributing to unrealized investment losses

 Operating performance for major insurers and reinsurers remained strong despite these issues as a 

result of below average insured catastrophe losses, US economic recovery and exposure growth in 

emerging markets
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 Alternative capital ended 2015 at USD72 billion, up 12 percent compared to year end 2014

– Collateralized reinsurance capacity saw the most significant increase of nearly USD6 billion 

to more than USD35 billion

– Sidecar and collateralized ILW capital increased to nearly USD8 billion and USD4 billion 

respectively (double digit growth in both segments)

– Catastrophe bond capital remained relatively flat year on year

Bond and collateralized market development

Source: Aon Securities Inc.

0

10

20

30

40

50

60

70

80

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

USD billions

Col Re Col ILW Sidecars Bonds
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Change in insurer capital

Source: Aon Benfield Analytics

$3.4T

$2.4T

$3.2T $3.5T $3.6T $3.8T $4.0T $4.2T $4.1T

-29% 34%

12% 

1% 7% 4% 

6% -2%

2007 2008 2009 2010 2011 2012 2013 2014 2015

 Insurer capital decreased by 2 percent compared to year end 2014, driven by strengthening of the 

US dollar

 Operating results were generally solid, as insurance companies continued to benefit from low global 

catastrophe loss activity
Section 3: Discussion Topics
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Developing a Robust Terrorism (Re)Insurance Market

Source: Aon Benfield Analytics

DISCUSSION TOPICS

 Can/Will the future of TRIA be NBCR Only?

 Can a make-available provision continue without a federal backstop?

– If not, how do we avoid a post-9/11 environment;

– if so, will insurers price themselves out of the risk?

Demand

• How much reinsurance capacity is needed? How to estimate?

• What is the political appetite for cost increase that will come with privatization?

Supply

 Reliable estimates of terrorism reinsurance capacity do not exist

– Can we get them? Survey reinsurance market? Estimate relative to Property 

Cat?

 Sufficient capacity for conventional scenarios exists; not for NBCR
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Developing a Robust Terrorism (Re)Insurance Market

Source: Aon Benfield Analytics

Alternatives

• Revised tax treatment for Terrorism reserves

• Pre- or Post-loss funding mechanisms

Resources/Experts 

• Large Account Property brokers

• WC Experts/NCCI

• RMS Terrorism experts

• Insurance Information Institute

• US Chamber of Commerce