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Reinsurance pricing to ‘split along regional lines’

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Asia-Pacific reinsurance buyers face a lower likelihood of significant price rises in next year’s renewal season than their catastrophe-hit US counterparts, according to Guy Carpenter.

The reinsurance broker bases its analysis on price movements after 2005 and 2011, which – like this year – suffered catastrophe losses above $US100 billion ($131 billion).

“In 2005, the year of [hurricanes] Katrina, Rita and Wilma, price increases were significant for US buyers, but not so for buyers in the Asia-Pacific region,” Guy Carpenter says.

“The differential can be explained by the fact 84% of 2005 losses stemmed from events in the US, whereas less than 2% came from the Asia-Pacific region.

“For [this year], the split is more likely to resemble 2005 than 2011.”

Guy Carpenter says price movements in both years indicate the market “was able to distinguish between loss-generating and non-loss-generating geographies”.

More than half of 2011 insured losses were in Asia-Pacific, Guy Carpenter says. Other research shows the earthquake and tsunami in Japan and New Zealand’s Christchurch earthquake accounted for two-thirds of overall losses that year.

Most reinsured losses in the Asia-Pacific region this year arose in Australia, which suffered about $1.5 billion in insured losses from Cyclone Debbie.