NU Online News Service, March 23, 2:50 p.m.EDT

The long-term effects of Japan’s disaster on the insurancemarket remain unclear, but there are indications that some firmingis taking place for risks in catastrophe-prone areas, sayexecutives from insurance broker Aon Corp.

In a webinar today discussing the insurance and riskmanagement implications for clients in Japan and others affected bythe March 11 earthquake and tsunami, Ted Hodgkinson, chief brokingofficer, Asia, Aon Risk Solutions, says the early indications arethat, excluding Japan, there are moderate increases between 0 and25 percent on April 1 treaty renewals. This is due to capacityoutstripping demand.

Regarding catastrophe risk reinsurance renewals, insurers areoffering coverage, but the location of risk is tantamount inrenewal negotiations, according to Hodgkinson.

On new business, “insurers are not offering capacity in anymeaningful way,” he says. But there is more flexibility away fromthe current disaster area.

“This is most likely a stop-gap as insurers understand theiraggregate exposures.”

There was a short-lived spike in prices initially after thedisaster throughout the Asia region, but those prices have returnedto more modest levels, he notes.

The future of the market-price structure will be driven by theultimate loss from this event, along with events in New Zealand andAustralia, he continues. However, a quiet second quarter, from acatastrophe standpoint, could lead to a stable marketplace.

“It is the early days, and the market seems to be actingresponsibly,” says Hodgkinson. “However, there is significantpotential for rapid change.”

Andrew Laing, property and casualty broking team leader, AonRisk Solutions in London, says there will be “considerabletensions” in the global property market, outside of the UnitedStates and Asia, but where catastrophes have taken place, pricesare expected to firm.

Rates should remain stable, except for those with globalcatastrophe exposures.

Prices will firm, and with the disaster in Japan, more of thatbusiness that is written domestically may flow into the globalmarket. That would reduce capacity and could lead to a hardeningmarket, Laing notes.

U.S. multinational clients have sustained losses, says Al Tobin,national property leader, Aon Risk Solutions U.S. in New York,primarily in contingent business interruption claims. Those losseshave ranged from a few million to tens of millions of dollars, heobserves.

Tobin says a change in rates from a catastrophic event affectingU.S. insurers would need to be in the range of $80-$100 billion. Itis still too early to know if this is that event, he adds.

Henry Daar, executive vice president with Aon Risk Solutionsproperty practice, points out that clients seeking insurancecoverage should look to their contingent time element coverage forinsurance recovery. This is coverage that covers interruption ofbusiness due to other businesses’ property damage.

He says this can cover the increase in costs in manufacturing orthe logistics that need to be overcome to get products tomarket.

Clients, he says, need to do what is best for their business andtake reasonable steps to keep their business going. However, theyshould notify their insurer of a claim as soon as possible.