The first quarter of 2010 will probably go down in history as the worst ever for catastrophe losses.

According to global reinsurance broker Willis Re (WSH), the insurance industry recorded $16 billion in insured losses, from the Chile earthquake and Windstorm Xynthia in Europe, but the largest losses occurred in smaller markets, where it premium volumes aren't as large. Since the third and fourth quarters tend to be the most loss-prone of the year, a quarter that is normally quiet could set the stage for outsized losses.

The first quarter catastrophes weren't enough to push property-catastrophe reinsurance rates lower. Even though the first quarter was a busy one for catastrophe losses, particularly for global reinsurers, they weren't sufficient to change the market. As a result, the four regions renewing at April 1, 2010 -- the United States, Japan, Latin America and South Korea -- ranged from soft to controlled, according to the latest from Guy Carpenter, the reinsurance arm of Marsh & McLennan (MMC). This comes as no surprise, as indications throughout the run-up to the renewal pointed to an orderly process in which there would be enough capital to support the market's needs.

After weeks of speculation, the financial damage from the Chile earthquake and Windstorm Xynthia in Europe is starting to emerge. According to a recent report by Moody's, 16 global reinsurance companies have reported their net insured losses (before taxes) from the catastrophe event, and the damage has already reached $3.5 billion, increasing an already high tally. The firm expects these events to have a noticeable impact on first quarter results for the industry.

According to the report, the first quarter of 2010's results "will have many moving pieces, including the possibility of favorable loss reserve development." It continues, though, that "we would expect a number of reinsurers to post both operating and net losses for the quarter."

Catastrophe modelers, insurers and reinsurers are still sorting out the damage from Windstorm Xynthia in Europe and the earthquake in Chile. Taking only the highest of high-end estimates, the damage from these two catastrophes could exceed $12 billion, resulting in fairly steep property-catastrophe losses long before hurricane season begins. With three more major property reinsurance renewals remaining for the year -- at April 1, June 1 (Florida) and July 1 -- there is plenty of time for the impact of these events to be absorbed into reinsurance pricing.

The earthquake that ripped through Chile left total economic damages estimated to range from $15 billion to $30 billion. The magnitude 8.8 quake impacted Santiago, where more than half the economic losses are said to have occurred, as well as the coastal area of Valparaiso and Vina del Mar, according to a report by catastrophe modeling firm EQECAT.

Based on the preliminary economic estimates, the impact of the disaster is equivalent to 10% to 15% of Chile's real GDP, and reconstruction costs are expected to be much higher than the stated losses, due to newer building standards that must be met. Damage to residential properties is expected to range from 55% to 65% of the total, with commercial damage accounting for 20% to 30% and industrial damage 15% to 20%, EQECAT says.

Insurance and reinsurance companies with risk in this region will be watching subsequent reports closely in order to gauge the impact on their portfolios.