Reinsurers may be underestimating catastrophe loss exposures by about 50% if the extreme events of the past decade are the “new normal”, according to Standard & Poor’s (S&P).

“The possibility that climate change is already affecting the frequency and severity of extreme events cannot be ruled out, even if it cannot be quantified exactly,” the ratings agency says in a report.

The study examines the past 10 years, which included hurricanes Katrina, Rita and Wilma in 2005 and the Thai and Australian floods, Hurricane Irene and US tornadoes in 2011.

It assumes the decade is typical and that the highest loss events would recur every 10 years on average.

“Our scenario’s one-in-10-year loss is about 50% higher than the one-in-10-year loss reinsurers are modelling,” S&P says.

Reinsurers are underestimating one-in-250-year losses by the same magnitude, the data shows when extrapolated.

“Under this scenario, key ratings metrics that we use to assess reinsurers’ capital adequacy and catastrophe exposure are materially affected,” S&P says.

The report recognises that the approach is simplistic, and says the real impact of climate change is likely to be less than the scenario indicates.

But S&P says it takes a favourable view of reinsurers whose capital modelling and exposure management consider how climate change could affect extreme weather events.

“We consider that disregarding the possible impact may lead reinsurers to accept higher catastrophic risk than their risk appetite would usually allow.”