Major broker Marsh says insurers are imposing sharp premium rises on high hazard risks and loss-affected accounts knowing they won’t lose the business because there’s so little competition for it.

Asia-Pacific Head of Placement and MD John Donnelly says some increases have been “quite shocking” to clients, while brokers have grappled with negotiating with insurers and communicating with clients in a more difficult market.

He told the Risk and Insurance Management Society Risk Forum in Sydney that “nobody wants high hazard business”.

“Nobody wants accounts that have got large claims. There is little to no competition for that business.”

Industry loss ratios for property and industrial special risks have been at unsustainable levels, sparking the tougher approach, but pressure remains in the market overall from plentiful capacity. Reinsurance expenses have also declined.

“The fundamentals aren’t there for the market to move up as a whole, so you are seeing the market go up in bits and pieces, where underwriters know they can carry an increase and they won’t lose business as a result of competition,” Mr Donnelly said.

In other classes, general liability remains under pressure, prices have surged for directors and officers’ cover amid class action activity, while professional indemnity has made gains in construction.

Mr Donnelly says reinsurance capacity is weighing on the global market after relatively few recent major catastrophes and with low interest rates keeping alternative capital in the sector.

“Reinsurance is a form of universally accepted asset class now,” he said. “Absent any major catastrophes, it looks like the capital in the market is here to stay for some time.”

Australian superannuation funds and hedge funds are among the groups investing “quite strongly” in the global reinsurance market.

Reinsurance capital worldwide has increased from about $US340 billion ($428.2 billion) in 2008 to $US605 billion ($761.9 billion), while alternative capital has risen from $US19 billion ($23.9 billion) to $US86 billion ($108.3 billion).

Mr Donnelly says premium declines across international markets moderated in the second quarter, continuing into the third quarter, according to Marsh global placement leader feedback.