Capacity in the reinsurance market, measured by capital, has reached an all-time high of $470 billion at the end of the first quarter of this year, meaning supply continues to outstrip demand globally.According to Aon Benfield’s latest reinsurance market outlook report, which covers the state of the global reinsurance sector at midyear, the recent injection of capital into the market has helped to keep pressure on rates. Rates have continued to rise steadily but it cannot be considered a ‘hard’ market as of yet.The report notes that while 2011 was the reinsurance market’s second highest year for insured losses, it ranked first for reinsured catastrophe losses. But renewals for loss affected programmes proved orderly and rate rises on some of them were meaningful.The report notes that while there has been an uptick in capital flowing into the reinsurance market, it’s equal to only one tenth of the amount of capital that flowed into the market after Hurricane Katrina. So while there’s enough capital to support capacity in loss affected regions, the report says it’s no surprise a good deal of it went into alternative reinsurance vehicles and instruments like sidecars and catastrophe bonds where it could be put to work.Aon Benfield notes that the catastrophe bond market, which continues to enjoy an expanding position in the broader reinsurance market, is growing in influence as a meaningful alternative to the traditional reinsurance market. The issuance of new cat bonds has been very strong in the last three quarters and growing interest from investors has helped provide insurers with better price visibility and multi-year commitments. The features, the report says, are important to insurers.The report also finds that the lower than average global catastrophe losses in the first quarter of this year, along with increased premiums at January 1 renewals have helped reinsurer capital return to its 2012 high of $470 billion. They expect capital levels, and therefore reinsurance capacity, will continue to increase throughout the year as catastrophe loss activity remains low through Q2.Aon Benfield’s report goes into some detail on some of the headline issues affecting the reinsurance market in the recent quarter including the Florida Hurricane Catastrophe Fund’s funding levels, Citizens Property Insurance’s reinsurance mix, National Flood Insurance Program and the Atlantic hurricane season.On the capital markets they discuss the success that the cat bond and insurance-linked securities (ILS) market has seen in the first half of the year. Aon Benfield says that the outstanding ILS and cat bond market was worth $14.9 billion at the end of June 2012. That’s up $3.4 billion from the same time in 2011 — encouraging growth, the report says, considering the low level of maturities expected throughout the rest of this year.To read Aon Benfield’s full report, go to http://thoughtleadership.aonbenfield.com/Documents/20120706_june_july_renewals_update.pdf