Is Australia too much of a business risk?

One of the world's biggest reinsurance companies says Australia has become a riskier place to do business because of a string of big natural disasters over the past two years.

The comments by Swiss Re may set the groundwork for an increase in the premiums that global reinsurance players charge local underwriters such as Suncorp or Insurance Australia Group to protect them from the cost of insuring against large floods, fires and storms.

As reinsurance represents one of the biggest single costs for insurers, any increase in rates is likely to be felt by home owners and businesses.

The past year ranked as the sixth most costly for the world's reinsurance industry, which is dominated by European and US companies.

The payout for the year's global catastrophes was US$37 billion.

Even before the taking into account the A$1.5 billion damages bill from floods, Australia and New Zealand combined had three of the world's top-10 catastrophes by cost - the hailstorms that hit Melbourne and Perth and the savage earthquake that struck Christchurch, New Zealand.

For most of the past few decades, Australia has been regarded as a good diversification play for global reinsurers. Disaster payouts were predictable and relatively small compared with the losses from the hurricane-prone US.

''There might be a view from the global community that there has been sufficient activity here to make some changes to [risk] ratings,'' the head of Australia and New Zealand for Swiss Re, Mark Senkevics, said. ''It is likely, in my view, that will happen.''

Despite hefty payouts in the past year related to disasters around the world, reinsurance premiums had been softening globally, with the industry seeing prices falling as much as 10 per cent. But in signs that the market could be turning, the world's third-largest insurer, Hannover Re, said it had been able to renew contracts this year at ''broadly stable rates and conditions''.

Suncorp yesterday sought to reassure investors that reinsurance protection meant its maximum exposure to claims from cyclone Yasi were likely to be capped at A$10 million, even though the damages bill was expected to run into hundreds of millions of dollars.

''Suncorp has a range of reinsurance protection in place that will minimise the financial impact of tropical cyclone Yasi,'' a spokesman for the insurer said.

Analysts said IAG appeared to be more vulnerable to Yasi. It is likely payouts will reach as much as A$100 million before reinsurance cover cuts in. This could mean a 10 per cent hit to full-year earnings.

IAG last year paid A$556 million in reinsurance premiums and Suncorp paid more than A$766 million in premiums.