Flagstone Reinsurance Holdings last night reported a first-quarter net loss of $161.2 million on heavy catastrophe losses.The loss broke down to $2.32 per share and compared with net income of $31.5 million, or 38 cents per share in the first quarter of last year.Natural disasters in Japan, New Zealand and Australia were the drivers of the loss in an extraordinarily expensive first quarter for the reinsurance industry.Flagstone, the 2005 Bermuda start-up that moved its domicile to Luxembourg last year, said its combined ratio was 170.3 percent for the first three months of the year compared to 97.6 percent in 2010.Diluted book value per share at the end of March was $13.34, down 13.7 percent since the end of last year, when dividends are included.Flagstone chief executive officer David Brown said: “As seen across the industry, the first quarter of 2011 was extremely challenging given the large number of significant international catastrophes.“We believe we have reserved conservatively for these events including the most recent reports from major Japanese clients which fall within our previously announced estimates. While our diversification remains a key strategic differentiator, and has over time resulted in an excellent long-term loss ratio, the international loss activity in the quarter reached record high levels, a historical anomaly which is reflected in our results.“However, we believe our overall capitalisation remains strong and more than sufficient to withstand AM Best's capital stress test which considers additional shock losses for future events.”Gross written premiums rose to $422.2 million, up 5.5 percent from the same period last year.Guy Swayne, Flagstone's chief underwriting officer, International, said there had been significant rises in rates in the disaster-stricken areas .“Australian and New Zealand treaty rates have increased by 50 to 80 percent, and Japanese treaty rates were up eight percent for wind and 50 percent plus for earthquake,” Mr Swayne said.“Although we continue to research the historical risk and return of these particular markets, we expect profitability to increase and they pose an attractive area to continue to underwrite measured risk.”Gary Prestia, chief underwriting officer, North America, was also seeing upward pressure on rates.“This had a positive impact on April 1 renewals, where a number of programmes had to be re-priced from mid single-digit percent decreases to slight increases in order to get completed,” Mr Prestia said.“We now expect North American rates to increase by an average of 10 percent or more for the June and July renewals, and will seek to capitalise on the opportunity to strategically underwrite our book of business while offering our capacity and modelling expertise to clients who are impacted by these changes.”