Following the significant natural catastrophe losses that impacted the Australian and New Zealand markets during the 12-month period prior to April 1, 2011, the corresponding period to April 1, 2012, did not witness the same frequency or severity of (re)insured losses.
In Australia, flooding events returned to the states of Queensland and New South Wales in January and February 2012. While vast areas of the country were inundated, the insured loss appears significantly lower than the Insurance Council of Australia’s (ICA) AUD2.4 billion estimate for the flooding during the corresponding period in 2011 that impacted the state of Queensland. The costliest event during this period was the December 25 hailstorm that struck Victoria. The current ICA insured loss estimate for this event is approximately AUD700 million.
In New Zealand, the city of Christchurch suffered a 6.3Mw earthquake on June 13, 2011. The earthquake struck approximately 10 kilometers from the city center, destroying buildings and causing further damage to those already affected by the earlier earthquakes that struck the city in September 2010 and February 2011. As a result of the unique nature of this series of earthquake losses, attributing an insured loss estimate to this latest event has proven to be very difficult.
As a result, in the run-up to the April 1, 2012, renewals, reinsurers signaled a desire to move reinsurance pricing upwards again, consistent with their approach to the January 1 renewals. This was particularly true for those April 1 renewals that had missed any significant corrective action on pricing in 2011. A further factor for some companies was a continuing deterioration in earlier loss estimates, although the major renewal date of July 1 will be a true test of reinsurer reaction to this issue.
Loss-impacted programs at April 1 saw double-digit rate increases. This occurred as ceding companies looked to maintain expiring deductible levels and horizontal coverage ahead of the Australian Prudential Regulation Authority’s planned introduction of revised capital requirements in 2013/2014. Largely in response to events in the region, especially the floods in Thailand, reinsurers also sought to limit contingent business interruption coverage for those programs renewing at April 1 in Australia and New Zealand.