Businesses exposed to identifiable wind and flood risks will face premium increases and more restrictions on their policies, according to Marsh’s latest report on the local insurance market.

Those businesses with identifiable risks will face the biggest changes, Marsh warns. It says even those clients with such risks who didn’t claim will still face more restrictive policies – although with lower premium increases.

Businesses with minimal identifiable risk and clean claims records will experience little in policy changes but will have to endure some premium increases due to a general increase in rates to cover this year’s losses.

“Each insurer’s response will depend on a number of factors including the profile of their underwriting portfolio as well as loss experience, facultative reinsurance arrangements and the timing of their treaty reinsurance renewals,” Marsh said.

Premium estimates on the local market have been based on this year’s floods, cyclones and earthquake claims, but Marsh admits the full impact of the Japanese earthquake and tsunami has yet to be felt by the global insurance industry.

“When costs from the tsunami and all business interruption, motor vehicle and marine losses – all unable to be accurately modelled – are added to the picture, the insured loss figure has the potential to increase dramatically.”

Marsh believes the second-quarter renewals for businesses will be the first indication of how the local market will be affected by the Japanese losses.

But in the first quarter, Australian business property premiums were either flat or rose in small amounts not exceeding 10%.

“We believe that conditions will continue to change leading up to the June 30 renewals and for the remainder of 2011,” Marsh said.

“General liability and motor premium rates were generally flat over the same period.”

In New Zealand, the insurer noted rate changes after the first Christchurch earthquake with premiums rising by up to 20%.

The middle market and small businesses had been particularly affected with deductibles for risk in the Canterbury province rising by 5%.