The reinsurance market continues to function efficiently and is unlikely to need major new capital inflows as a result of recent disasters, Aon says in its latest reinsurance review.

The company also finds that recent catastrophes have not stopped the continuing decline in US and European property catastrophe rates. 

In its latest Reinsurance Market Outlook, Aon notes that almost all Japanese programs were set to renew on April 1, but after the March 11 earthquake and tsunami many insurers opted to extend current programs while they assessed losses.

When renewals did occur, the cost of typhoon programs increased by 5-10%, and most earthquake programs increased within a range of 25-50%. 

Aon Benfield Analytics Chairman Bryon Ehrhart says it’s understandable that some major Japanese insurers paused the renewal process while they took time to assess the impact of the earthquake and tsunami.

“However, the reinsurance market remains functional with its existing capital base, and we do not anticipate the need for material new capital flows into the reinsurance market to satisfy insurer demand for catastrophe reinsurance based upon the global events to date,” he says. 

Mr Ehrhart says recent catastrophes have shown the market is responding to insurers’ needs. Back-up covers continue to be placed with conservative reinsurance pricing that is sensitive to the potential of increased insurer retentions.

“Much greater stability in the regional insurance markets has been achieved as a result of effective reinsurance programs, and affected insurers have gained new or reaffirmed existing respect for the volatility that can accompany frequent chance events,” Mr Ehrhart said.

The report says April 1 reinsurance renewals in the US saw property catastrophe rates there fall by 5-10%, including for hurricanes. Aon forecasts that the forthcoming June and July renewals period will see price changes of flat to down 5% for US hurricane-driven programs.