The overall global insurance market remains well-capitalized and generally competitive despite major natural catastrophe (CAT) losses in the second-quarter of 2011, according to a report published today by Marsh.

Insurers, however, are being more selective in the capital they deploy and have in some cases withdrawn from catastrophe affected regions and loss-making sectors of business, according to Marsh’s Second Quarter 2011 Insurance Market Update. As a result, accounts with losses or with a significant proportion of catastrophe exposures are experiencing tougher market conditions.

The expectation of an active U.S. hurricane season, combined with greater insurer discipline, increases the potential for a changing market dynamic through the balance of 2011.

“Although there has not been an overall change in market pricing in the wake of further natural catastrophes in the second quarter--including storms and tornadoes across the United States — the global insurance market remains under pressure,” said Nick Bacon, CEO of Bowring Marsh. “Many insurers and reinsurers have already seen their 2011 budgets for catastrophe losses substantially eroded, if not exceeded. And this was before the start of the Atlantic hurricane season.”

According to Marsh’s report, property renewals varied widely in the second-quarter depending on loss records, catastrophe exposure levels, catastrophe cover purchased, and the quality of data submitted. Generally, insurance programs with catastrophe exposures representing at least 25 percent of the total insured value saw rate increases of up to 15 percent.  Property programs with no significant catastrophe exposure, however, continue to enjoy competitive market conditions with most policies renewing flat or with small increases or decreases in the quarter.

“With rate reductions less common in certain product lines, it is important that organizations increase their engagement with underwriters to differentiate their risk profiles,” noted Dean Klisura, U.S. Risk Practices Leader, Marsh.

Overall, the global primary casualty insurance market began to see small increases in rates for many lines of business in the second quarter, while excess casualty rates remain competitive.

The U.S. directors and officers (D&O) liability market remains relatively soft, with most insureds experiencing flat to slight decreases in rates at renewal. Internationally, D&O rates continue to fall, with financial institutions typically receiving double-digit reductions at renewal. Overall, the pace of rate reductions is slowing, however, as some insurers institute stronger underwriting discipline.