Global reinsurance capital grew by seven percent last year to reach $540 billion by the end of 2013, according to global reinsurance broker Aon Benfield.

The figure, quoted in the Aon Benfield Aggregate (ABA) report, includes both traditional and alternative forms of capital available for insurers to trade risk with.

The firm’s latest study found that capital reported by the ABA group of 31 leading reinsurers increased by six percent ($20 billion) to $337 billion, driven primarily by $34 billion of net income. Repatriation of equity capital in the form of dividends and share buybacks rose by 15 percent to $20 billion, partly reflecting the increasing engagement of third party capital.

Business is also growing for reinsurers with gross premiums written by the ABA growing five percent to $199 billion, driven by the impact of acquisitions and growth in emerging markets.

All of the 31 companies, more than half of which are active in the Bermuda market, made an underwriting profit last year, helped by a 38 percent fall in the disclosed catastrophe losses and a 23 percent increase in favourable prior-year reserve development.

The challenges of a low-interest rate environment were clear in the report with the yield on investments falling 30 basis points to 3.1 percent — down by a third from 2006.

Mike Van Slooten, head of Aon Benfield’s International Market Analysis team, said: “Reinsurers have reported resilient results in an increasingly competitive marketplace. Most are now adapting their business models to accommodate the increasing availability of lower cost capital, thereby enhancing both their risk transfer capabilities and their offering to clients.

“We expect capital management activity to accelerate, as the advantages become more apparent.”