Australian insurance companies sent their key officials to London last week to meet with sponsors and urge them to renew their July reinsurance contracts.

Speculations say reinsurance rates could easily go up more than 50 per cent in some categories. More than the increase of costs for general insurers, the major concern being raised in London is the retention cost that will be required for them to run.

For a long time Australian insurers have enjoyed very low retentions. The alarm for them will be a mixture of much higher retention fees as well as higher reinsurance costs.

This shall force general insurers to pass on the higher costs to customers. Moreover, a higher retention rate means more capital for shareholders.

With this, some reinsurers will either pull out from the local market or charge heavily to continue doing business. Consequently, it will have ominous consequences for Australian business.

The Japan crisis is considered as a stimulating event by insurance brokers and sponsors. With natural calamities at hand, many are in distress, thinking of which city could be the next victim of such catastrophe.
QBE being the world's second-biggest sponsor of Lloyd's insurance was the first insurer to put an estimate on its exposure to Japan.

QBE handle to buy a three-year “fixed price program” which began this year. Even so, it is still unknown how Frank O'Halloran computed the group's coverage to Japan.