The risk manager is angry and not prepared to accept the insurers’ approach. “We are currently looking for alternatives for cover—smaller insurance companies in regional markets,” he said.

Ralf-Dietmar Berg, who leads the property unit of broker Willis in Ger-many, experienced similar problems with his clients. “Depending on the region we observe price increases of 150% and the reduction of limits, especially in critical areas like Japan, the Eastern coast of the US, Australia and New Zealand,” he said.

For reinsurers like Munich Re or Hannover Re, 2011 was of course a year hit by extremely high losses from natural catastrophes.

Hannover Re had to handle insured claims of about €681.2m driven by the losses in Japan, the US and Australia. It raised prices for global catastrophe cover 16.8% on average during the recent renewals. Munich Re estimates its worldwide losses at up to €4.5bn for 2011.

The reinsurer expects rising prices at the next major renewals on April 1 and July 1, when contracts in especially hard-hit regions like Japan, Australia and Latin America will be negotiated.

“The economic environment prohibits us to offer reinsurance cover for inadequate prices,” chairman of the board at Munich Re Torsten Jeworrek said.

Though many corporate insurance buyers may not be happy about the rising prices and falling limits, most will not be overly-surprised by the reaction of the leading insurers and reinsurers following the huge losses in 2011.

“Raising premiums is not a surprising measure of the reinsurers,” Mr Berg of Willis said. “The natural catastrophes of 2011 were not a secret and corporate clients should have been prepared for it in this business line,” he added.

But, on the other hand, there is also a tendency amongst reinsurers to react immediately and raise prices as soon as possible even if the prices are sufficient in other lines of business this annoys risk managers.

“Clients feel left alone by the insurance industry and start to think about alternatives in the regions. They feel frustrated, even if they can sometimes understand the reinsurers’ situation,” added Mr Berg.

The broker expects the recent price hikes to have a more lasting effect on the industry beyond just angering corporate customers in the short term. They even could have severe consequences on international insurance programmes, he told CRE.

“In the past we had a kind of shopping mentality—to buy worldwide cover in bulk from a single reinsurer. In the medium-term view these times will be gone,” he suggested.

Corporate clients with production plants in vulnerable regions face a major rethink about the way such risks are included within their global programmes, said Mr Berg.

“If they do not accept increased prices in certain regions they have to reconstruct their international programme. This makes them open to blackmail,” said the broker.

As a consequence, clients in areas threatened by earthquakes or flooding will have to take these risks out of their programmes and negotiate separate and individual cover with various regional insurance companies, believes Mr Berg.

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