Reinsurers can expect the catastrophe market to continue to grow following an increase in losses and severity of events in areas that haven’t previously been affected.

An Aon Advanced Risk Finance conference in Melbourne last week heard the catastrophe market is continuing to grow despite a “benign” 2009.

Aon Benfield Australia and NZ CEO Robert De Souza says a low number of catastrophes last year coupled with increased returns on investments has led to an excess supply in capital markets.

However, this year has proved to be a different story with catastrophic events totalling more than $15 billion in losses recorded in the first quarter.

“We’ve seen more losses in areas in terms of threat and severity that we haven’t seen before,” Mr De Souza said. “So we think the catastrophe market will continue on that basis because there is enough capacity for it globally.”

He predicts this will lead to reinsurers applying more pressure for the re-pricing of risks.

“Because the reinsurance market provides risk capacity for Australia and NZ, they don’t balance their losses globally and are much more reactive to local experiences,” he said.

“I think hailstorms locally and the Christchurch earthquake had more effect on the insurers’ risk programs, and we see that coming under more pressure.”