Reinsurance capital dropped 3% to $585 billion in 2018, the first decline since 2015, according to a report from Aon PLC on Monday.

Traditional equity capital declined by 5% to $488 billion as alternative capital rose 9% to $97 billion, Aon said.

Macroeconomic factors bearing upon the decline in traditional capital included higher U.S. interest rates, leading to unrealized losses on bond portfolios; a strengthening of the U.S. dollar, which is the conversion currency for international capital positions; and a stock market correction in the final quarter of 2018.

A recent accounting change also introduced significant additional volatility to reported results, Aon said.

Although total catastrophe losses in 2017 and 2018 reached over $240 billion, 2019 first-quarter total catastrophe losses are 47% lower than the recent 15-year average and 26% below the median, the report said.

Despite the decline, Aon says overcapacity still exists in the reinsurance market.

“Global reinsurer capital remains resilient in the face of insured natural catastrophe losses aggregating to over $240 billion over the last two years,” Aon said. “Excess reinsurance capacity continues to exist, despite an increase in demand for reinsurance solutions on a global basis.”

Although alternative capital increased in 2018, the sector’s growth has slowed as the continuing entry of new funds has been partly offset by losses from catastrophe events and redemption requests from investors, Aon said.

Aon, however, expects growth to continue once this area of the market has fully digested the losses incurred over the last two years.

“Many long-term investors have made good returns over time, and the strategy of investing in insurance risk for diversification purposes in a low interest rate environment remains valid,” Aon said.

Catastrophe bond issuance totaled $9.7 billion in 2018, the second most active year on record, and total limit outstanding is at a record high of $30.6 billion, while “further high levels of activity have been seen in the first few months of 2019,” Aon said.