NU Online News Service, April 16, 1:18 p.m.EDT

Catastrophe risks can expect to see double digit insurancepremium increases through the rest of this year as underwritingcapacity dwindles and the hurricane season approaches, an executivefrom Marsh said.

After years of the competitive soft pricing market cycle,insurers will be seeking increases on heavy catastrophe exposedrisks that could go higher than 15 percent said Duncan Ellis,leader of Marsh's U.S. property practice.

Mr. Ellis said key factors for rates are the insured's losshistory, exposure, modeling and discounts previously receivedduring the soft market,

"Those that received the biggest soft market discount will seethe largest increase," said Mr. Ellis, adding that the increasescould range from 10 to 15 percent or higher.

His comments came during the insurance broker's monthly NewReality of Risk online seminar during a session titled "NaturalDisaster Risk Management--Current issues for Hurricane, Flood andEarthquake Perils."

Mr. Ellis said the overall property-casualty catastrophe marketis going through "dramatic transition" as prices are on the riseand capacity in reduced.

Other factors affecting property cat pricing are increasedreinsurance costs, lack of capital market support, rating agencyscrutiny and changes in catastrophe modeling that are affectingcapacity availability, he explained.

Earlier this year, capacity was available but "for some therewas a struggle to achieve capacity at what would be considered aneconomic price" which was a price acceptable to both buyer andinsurer, said Mr. Ellis.

Generally, catastrophe renewals in the first quarter of 2009came in at flat to up 10 percent. The second quarter is expected tobe higher because of diminished capacity and the onset of thehurricane season, he said.

To combat these issues, Marsh, a subsidiary of New York-basedMarsh and McLennan Companies, is marketing accounts to a wide arrayof players as it seeks layers to cover the risk, explained Mr.Ellis. One strategy to control pricing is to work with the lowerlayer insurers, which he indicated could reduce the overall cost ofthe insurance placements.

For non-catastrophe property risks the market will remainextremely competitive, he noted, because insurers want these risksto balance out their portfolios.

Catastrophe modeling remains the key driver for the p-cmarketplace, Mr. Ellis said, with rating agencies relying on themheavily for their analysis.

Insurers, he explained, are trying to "get pricing back in linewith modeling" and some insurers are pursuing price increasesregardless of changes made to the models because of the soft marketpressures on their earnings. He added that the models, which willincorporate lessons learned from last year's Hurricane Ike, may notdiffer that dramatically from the current ones.

The seminar session can be accessed online at www.marsh.com.