CHRISTCHURCH, New Zealand—Australian insurers' reinsurance costs are expected to rise as losses mount from an earthquake that caused significant damage on New Zealand's South Island, a rating agency said Wednesday.

Catastrophe modeling companies have estimated that insured losses could be as much as $4.5 billion from the 7.0 magnitude quake near Christchurch. The losses are heavily reinsured, Fitch Australia Pty. Ltd. said.

Insurance Australia Group Ltd. and Suncorp-Metway Ltd. combined have 60% of the property market in New Zealand, Fitch noted in a statement. Net exposures for the insurers are low, however, amounting to 60 million New Zealand dollars ($43.3 million) for Suncorp and a “negligible” exposure for Insurance Australia, the Sydney unit of New York-based Fitch said.

The earthquake losses follow a trend of increased frequency of large catastrophe losses in the region in recent years, which are expected to cause shrinking availability and higher costs for reinsurance, Fitch said.

The rating agency said quake losses likely will mean that Insurance Australia needs to purchase additional reinsurance limits since its catastrophe reinsurance program is limited to one full reinstatement and does not renew until the end of the year.

Insurance Australia was hit earlier this year by losses from storms in Melbourne and Perth, Fitch noted.

Suncorp renewed its catastrophe reinsurance coverage on July 1 and its reinsurance program was not affected by claims from the storms, Fitch said.