Willis Re offers yet another industry warning about the oversupply of global capital in reinsurance.

The reinsurance division of Willis Group Holdings said that dedicated global reinsurance capital is now at $425 billion, reflecting a 5 percent jump in 2014 in aggregate shareholder’s equity, including capital from non-traditional sources.

Making matters worse, global insured catastrophe losses dropped 25 percent in 2014, down to $35 billion, Willis Re noted in its new reinsurance market report. That’s the third successive year of low global insured catastrophe losses.

The screws are also tightening with diminished underlying returns on equity, which Willis Re said continue to be supported by prior year developments and below-average catastrophe losses. Companies that have supplied catastrophe loss disclosure show an 11.5 percent aggregate reported return on estimate. That number is misleading, Willis Re said, noting the number would drop to 5.9 percent based on a more typical catastrophe year and excluding prior year reserve releases.

To counter the continued problem of excess capital, a number of larger, publicly listed reinsurers are accelerating share buybacks, which led to a $7.3 billion return to shareholders, along with $2.4 billion through special dividends.

John Cavanagh, global CEO of Willis Re, said the reinsurance market is getting hit “from all directions.”

“For the time being,” he said in prepared remarks, “reinsurer [returns on investment] continue to be flattered by low catastrophe losses and strong support from prior reserve releases, but the continuing shift of the reinsurance market reflects the required balance sheet scale and breadth of product offering required for reinsurers to remain relevant in this highly competitive market.”

Source: Willis Re