Europe’s financial upheavals are forcing reinsurers to be more cautious in providing capacity as the June renewals progress, according to a senior reinsurance executive.

The executive, who spoke to insuranceNEWS.com.au on condition of anonymity, says that apart from the catastrophe losses of the past two years, European reinsurers are contending with depressed investment earnings and eurozone weaknesses.

“Continued euro weakness will negatively impact on capacity supply because local liabilities will have to be met in local currencies but capacities are backed by euro capital,” he said.

“It is difficult to hedge this dilemma at this stage and so there is no expectation for any huge influx of cat capital in the coming renewals.”

Added to this is the complexity of events such as the New Zealand earthquakes and Thai floods, where it will take years to determine final losses and reinsurers still have many claims on their books.

“The latest raft of cat events occurring throughout the Asia-Pacific region have left more reinsurers with huge negative technical results and ongoing longer-tail cat claims that will take years to settle,” the executive said.

He says those factors are likely to drive the cost of reinsurance higher in the next 1-2 years “and may be aggravated at any time if additional claims occur on top of the current claims situation”.

Also see ANALYSIS