NU Online News Service, July 6, 3:09 p.m. EDT

Reinsurance renewals for the worst-impacted catastrophe property risks experienced sharp increases for June and July, but ample capacity remains in the market, according to an Aon Benfield report.

In its “Reinsurance Market Outlook, June and July 2011 Update,” Aon Benfield says June and July brought “meaningful rate changes” to regions affected by significant catastrophe events.

July 1 catastrophe renewals consisted of “the usual U.S. insurers, Australian insurers and those Japanese insurers that extended their April 1 programs by three months,” while June 1 renewals were mainly Florida and New Zealand, says Aon Benfield.

Florida renewals ranged from flat to minus-5 percent for Aon Benfield clients. Co-brokered accounts experienced average increases of 10 percent.

New Zealand accounts, however, were not so lucky, seeing increases of 100 percent, primarily due to the “large and uncertain losses” from the series of earthquakes that struck Christchurch.

June trends extended into July catastrophe renewals, says Aon Benfield, with U.S. insurers’ renewals at flat to minus-5 percent. Japan programs renewed with price increases in the range of 30-50 percent. Australia insurers’ price increases ranged from 15-70 percent, according to the report.

Despite the Tohoku earthquake and catastrophe events elsewhere in the Asia/Pacific region, overall reinsurance capacity was down only 6 percent, or $30 billion, to $440 billion.

Aon Benfield says the level is still higher than it was in 2007 when reinsurer capital stood at $411 billion. The report suggests that capacity remains “ample.”

Aon Benfield says first-quarter catastrophe losses to its aggregate group of 37 reinsurers stand at $21.6 billion.

A vital tool for increased capacity is insurance-linked securities, and five catastrophe bonds were issued in the 2011 second quarter for a total of $742 million, a drop from the $2.3 billion issued in 2010 during the same period.

The total catastrophe-bond volume outstanding for the second quarter of this year sits at $11.5 billion, down from more than $13 billion for the first quarter.

The drop was caused in part by some issues maturing and not being reissued or replaced.

Aon Benfield Securities says it forecasts “substantial issuance of catastrophe bonds in the second half of 2011” which is based on discussions with interested sponsors.