The chief executive of a major wholesale insurance broker said commercial insureds can conceivably see requests for double-digit increases for catastrophe risk coverage as reinsurance rates rise and insurers grapple with investment losses on their balance sheets.

Edison, N.J.-based NAPCO said this year’s renewals will stand in sharp contrast to the reductions or flat renewals that characterized the category in 2008.

“The two wind seasons following Katrina in 2005 were relatively inconsequential from an insurance loss perspective,” David Pagoumian, chief executive officer of NAPCO, said in a statement.

“Damage caused by Gustav and Ike, combined with several single-location losses in excess of $500 million each, made 2008 one of the two or three worst years on record for catastrophic losses,” he noted.

Increasing reinsurance costs were exacerbated by the tightening capital markets and catastrophic damage settlements caused by a 2008 wind season that included Hurricanes Gustav and Ike.

Mr. Pagoumian noted that the general economic downturn has affected the ability of the underwriting community to absorb the financial impact of catastrophic settlements. In previous years, underwriters could count on gains in the stock and bond market to bolster their balance sheets.

“Rate reductions are relics and flat renewals are quickly disappearing as well,” said Mr. Pagoumian. “Carriers are talking about rate increases that could range from 10-to-30 percent, especially in coastal areas like Florida and Texas.”

“In some cases, I think we’ll see carriers actually walk away from business if they can’t achieve increases in that range,” he suggested.

Mr. Pagoumian did note, however, that commercial property owners without much catastrophe exposure could negotiate flat renewals, and that any rate increases for those with significant exposure will vary by carrier and largely depend on where the risk is situated and how it is spread geographically.

Armand Colaninni, an executive vice president for NAPCO, told National Underwriter that while insurers are pressing for increases on renewals on all risks, insurers are not necessarily getting those double-digit requests.

One major reason is that while insurers may be seeking a price boost, the demand for insurance has also dropped as the recession takes a toll on insureds’ businesses.

Carriers are proving to be flexible, said Mr. Colaninni, more interested in retaining accounts in the face of a very difficult economy where business values have dropped dramatically.

“What we are going to see is a hardening market, but it will be a gradual shift,” he said, unlike past cycle events where the hardening happens quickly.

“We are hearing from carriers that they want 15-to-20 percent to offset their reinsurance costs, but in the first couple months of the year, we’re not seeing them able to get those sorts of increases,” he said, adding that large carriers have gone higher in their requests but are not getting those numbers.

Insurers may get higher increases toward the spring and later in the year, he noted, but that will depend on the health of the economy.

However, Mr. Colaninni reported that carriers are saying if they have a bad catastrophe loss, things could change dramatically, “and I would tend to agree with that. But at this particular time, it is going to be more of a gradual shift.”

“We are in unusual times right now,” he added.