Last year was the third most costly on record for natural catastrophe losses in the property insurance market, according to an Aon report.

A string of earthquakes, wildfires, typhoons and hurricanes caused up to $US124 billion ($161.45 billion) in estimated losses worldwide.

However, the losses will remain an earnings event, not a capital event, the report says.

The property insurance market will continue to suffer diminishing profitability, according to Aon. Exhausted reserve releases, reduced premium volumes, larger insurer net retentions and the frequency of loss activity have hit profits. Combined operating ratios have been consistently above 100%, against a target of 85-90%.

Insurance risk selection is becoming harder, and there is less capacity for property insurance in more hazardous areas and occupancies, the report says.

Risk-selection issues will lead to pricing and capacity pressure on “less desirable” occupancies and regions for some time.