Reinsurance premiums in the Asia-Pacific region could double by 2020, but the increase will come with high exposure to natural catastrophes, according to Munich Re.

Event intensity and frequency is rising and models only partially anticipate changes such as populations moving to coastal regions and property values increasing, CEO for Australasia, Japan and India Roland Eckl says.

He predicts the region will be the main driver of world insurance growth, accounting for nearly half of all new primary insurance premiums up to 2020. But emerging markets will remain underinsured, especially for natural catastrophe loss.

Mr Eckl told insuranceNEWS.com.au weather-related events in Australia have increased almost four-fold since 1980, and urgent action is needed to reduce risk and respond to threats, including research and mitigation work.

“Due to the high natural climate volatility and its extremes – droughts, heatwaves, floods – small changes in climate may result in high losses.”

Mr Eckl says reinsurance pricing is likely to remain steady despite the influx of alternative capital.

The new capacity is mostly invested in non-proportional natural catastrophe business in countries such as the US, Japan and Australia, where the risk is well modelled.

Therefore catastrophe reinsurance, particularly in the US, has become more competitive.

But the alternatives need to make a return on their entire investment, while Munich Re can leverage its diversification benefit.

“I am convinced that diversified reinsurers will preserve their long-term role, also in nat cat business,” Mr Eckl said.

“We offer experienced underwriting know-how, provide claims services and, above all, are financially strong long-term partners supporting the business development of our clients with customised solutions.”

About $US10 billion ($10.98 billion) of alternative capital has entered the industry in the past year, but Mr Eckl says it is not a new phenomenon. The same thing happened in 1992 and 2005 after major US hurricanes.

“It is not clear if the alternative capacity inflow will be permanent,” he said. “In the past only a certain portion of the additional capital stayed in the market. The sustainability has not been tested so far by a huge catastrophe loss.”