Australian insurers should expect rate increases at the June 30 reinsurance renewals period that are above the 15% experienced in 2010 and 2009, Munich Re has warned.

In an interview with The Australian Financial Review, Ludger Arnoldussen, the Munich Re board director responsible for Asia-Pacific and Africa, says increases for the past two years were around 15%, “and those were for small losses”.

“These recent losses are significantly larger, so I think there is potential for more.”

He says the number of natural catastrophes in Australia has more than tripled since 1980, and recent events have led to an “unusual focus on Australia at the moment”. As well as the large catastrophes, Dr Arnoldussen says there has also been an increase in small weather events.

He says the increased frequency of severe weather across Australia has prompted a closer analysis of Munich Re’s local operations.

“There’s more focus on the profitability of the Australian natural catastrophe business,” he says. “While Australia might diversify a reinsurer’s risk position, it also costs a lot of money.”

Swiss Re has also confirmed it will be “carefully analysing” the catastrophes, which could lead to a review of its modelling assumptions.

Mike Mitchell, MD and Chief Property Underwriter for Swiss Re Asia, told insuranceNEWS.com.au that significant events like the recent natural catastrophes in Australia “provide opportunities to review hard data to verify or adjust these modelling assumptions. We will be carefully analysing these latest losses to establish whether our assumptions need to be updated.”

However, ratings agency Moody’s says that globally, reinsurance pricing will remain soft as the catastrophes have not led to a significant fall or rise in either the supply of, or demand for, reinsurance.

Moody’s VP and Senior Credit Officer James Eck says the catastrophe events in Australia and NZ “will likely drive regional pricing higher during the renewal period, [but] such localised pockets of strength will not be enough to offset the pricing declines experienced in other peak catastrophe risk zones, such as US areas vulnerable to hurricanes and earthquake, as well as in most casualty reinsurance lines.

“Because Australian primary insurers have heavily reinsured their risks, and the floods and Cyclone Yasi constitute as many as five separate loss events within their reinsurance treaties, global reinsurers are likely to bear a significant proportion of the overall insured losses.”

He says some of the largest loss estimates so far from the floods lay with large, globally diversified reinsurers including Munich Re, Hannover Re, XL Group, Partner Re and Transatlantic Holdings.

In the case of Partner Re and Flagstone Reinsurance, Moody’s notes that the number and cost of events in 2010 triggered their aggregate reinsurance covers, resulting in additional losses.

But Mr Eck concludes that while the catastrophes will impact on the earnings of reinsurers, they will not affect their capital bases.