NU Online News Service, April 12, 2:52 p.m.EDT

Global-reinsurer capital declined 3 percent in 2011 over theprevious year as first-quarter catastrophes and reduction incapacity from government programs took a big chunk out of thetotal, says reinsurance broker Aon Benfield.

However, the Aon Benfield Aggregate report for full year results 2011 says itsreview of the 28 leading reinsurance companies reveals an increaseof close to 2 percent for the group on a year-over-year basis inshareholders' funds despite the impact of first-quartercatastrophes.

In the first quarter, catastrophes caused reinsurancecapital to drop 6 percent from full year 2010 level of $470billion, to $440 billion. In the next three quarters, capital rose1 percent in each quarter, reflecting “retained profit reported bytraditional reinsurers,” the report says.

“The reinsurance sector remains strong after a testing year in2011, and continues to provide very efficient underwriting capitalto insurers,” says Mike Van Slooten, head of Aon Benfield'sinternational market analysis team in a statement. “The volatilitysustained by reinsurers was substantial and materially improved theearnings and capital reported by insurers affected by unusualfrequency and severity of events occurring in 2011. The valueproposition of reinsurance has rarely been so clearlydemonstrated.”

The Aon Benfield Aggregate (ABA) of 28 reinsurers reportsshareholders' funds of $251 billion, an increase of $4 billion fromthe prior year's $247 billion.

The growth was driven by a few companies, principally Swiss Re,White Mountains, Hannover Re and ACE, the report says. The vastmajority of other companies in the index saw shareholders' fundsdrop, some as much as 30 percent.

Gross property and casualty premiums written by the ABA grouprose more than 11 percent to $136 billion from the prior year's$122 billion, the report says.

The group showed a combined ratio of 108.2 for 2011, adeterioration of 13.5 points from the 2010 combined ratio of94.7.