Severe hailstorms in Perth and Melbourne have contributed to the costliest first-quarter natural catastrophe losses on record, according to Willis Re.

An “unprecedented” $US16 billion ($17.28 billion) in global losses in the first three months of 2010 include the Chilean earthquake, Winter Storm Xynthia in Europe and severe storms across Australia.

Despite greater incidences of weather and catastrophic events, Willis Re predicts reinsurance premiums won’t rise as capacity oversupply and sluggish top-line growth offset escalating claims.

Willis Re CEO Peter Hearn says one poor quarter won’t be sufficient to spark a hardening of global rates.

He concedes the disastrous start to the year would “stiffen reinsurers’ resolve on renewals later in the year as the size of the recent catastrophe losses develop and back-year reserve releases reduce”.

“This is balanced by the remaining reinsurance capacity oversupply and the continuing difficulties companies face in achieving any top-line growth to offset claims and expense increases,” he says.

“Against this background, [if there are no] other major losses, buyers who will be renewing loss-free programs later in the year can continue to budget for stability or modest reductions in their reinsurance costs.”

The latest report from Willis also highlights reserve releases may be tapering off and investment returns are likely to wane as reinsurers reshuffle portfolios to include safer, long-term investments like government debt.

Renewed interest in government bonds is a concern, Willis Re says, as systemic public debt becomes the norm.