Wesfarmers Insurance has renewed its reinsurance program until June 30, 2012 with increases in its catastrophe cover.

The catastrophe excess has now increased from $400 million to $750 million with net retention limits increasing from $10 million to $30 million in Australia and $NZ20 million ($15.6 million) in New Zealand.

The net retention limit in Australia reduces to $20 million should there be second and third losses.

Wesfarmers Insurance MD Rob Scott says reinsurers have insisted on increased pricing and higher retention levels after the number of natural disasters this year.

“We are pleased to start the new financial year with a strong reinsurance program in place with continued support from many longstanding reinsurance partners,” he said.

“Earthquake aftershocks in Christchurch, including the aftershock on June 13, have resulted in further claims above allowances.”

Mr Scott says the increased cost of reinsurance and catastrophes will hit this financial year’s earnings for the insurance business.

“Current expectations for the 2011 financial year are for earnings before interest, tax and amortisation to be in the range of $25 million to $30 million,” he said. 

“The key driver of lower earnings in the year ending June 30 has been higher claims from catastrophe events in Australia and New Zealand and higher reinsurance costs.”