The global reinsurance industry demonstrated a significant recovery of prior-year capital losses in 2023, driven by strong technical results, unrealized capital gains, and higher reinvestment rates, according to A.M. Best.

In a new report, the rating agency reports that traditional reinsurers capitalized on the improvement in their technical results throughout 2023, as higher rates and stricter terms began to earn out on portfolios.

Best suggests that investment losses in 2022 were partly reversed in 2023. When combined with higher fixed-income reinvestment rates, investment portfolios generated strong overall investment income for the market. The improved underwriting and operating results also helped to bring about the significant recovery in 2023, although this was partly counterbalanced by market participants’ capital distributions.

Last August, Best projected 12.2 percent year-over-year increase in traditional reinsurance capital to $461 billion for 2023, but as the North American hurricane season ended, reinsurers were on pace to nearly double that projected increase.