As the insurance market begins to harden, with insurersboosting premiums or seeking stricter terms for some types ofcoverage, risk managers for the most part are accepting thosechanges.

A recent survey by Hanover Stone Partnersshows only a minority of companies have responded to price hikes orstricter terms by switching their insurer or broker or adjustingtheir retentions. But John Kelly, managing partner at HanoverStone, a network of risk management advisers and services firms,predicts that as the insurance market continues to tighten, morecompanies will look for ways to contain their costs.

“There are pretty tight budgetary constraints and financialexpectations that really put a lot of pressure on risk managers ina rising market to maintain stabilization of the pricing,” Kellynotes.

The survey looked at about 100 renewals of a variety of types ofinsurance coverage by Fortune 500 companies in the quarter endedOct. 1. The responses show that the majority of companies areseeing premiums rise on renewal.

For example, 50% of the companies surveyed saw an increase of 1%to 5% to renew general liability coverage, while 10% saw anincrease of 6% to 10%. Ninety percent made no change to achievebetter pricing, while 10% changed their broker.

For workers compensation coverage, 43% of companies saw anincrease of 1% to 5% upon renewal, while 15% saw an increase of 6%to 10%. Thirteen percent responded by changing their broker andanother 13% changed their carrier, while 74% made no change.

Property coverage was a line where companiessaw both higher prices and changes in terms. On U.S. propertycoverage, 72% saw premiums rise on renewal, with 14% seeingincreases of more than 15%, 29% seeing hikes of 6% to 10% and 29%seeing hikes of 1% to 5%. And insurers offered higher retentions ordeductibles to 29% of the companies, and both restricted terms andhigher retentions to another 14%. While 72% of companies made nochanges, 14% agreed to more restrictive terms and 14% adjustedtheir retentions or deductibles.

For global property coverage, 75% of buyers saw premiumsincrease, with 25% seeing increases of 11% to 15% and 25% seeinghikes of 6% to 10%. Companies renewing global coverage were notoffered more restrictive terms, though. Their response to the pricehikes: 33% changed carriers, while 67% made no changes.

The differing responses in theU.S. and global property markets reflect “the competitiveness inthe global property market,” says Kelly, pictured at left. “Lookingat a global program, there are more viable alternatives, and Ithink there are markets in global property that are trying toposition themselves to take advantage of pressures and gain marketshare.”

Hanover Stone expects insurance prices will continue to risethis year. Kelly notes that since interest rates aren't likely torise in the short term, insurers will continue to see limitedreturns on their investments.

And changes to catastrophe modeling in the wake of HurricaneSandy, whose impact the models failed to accurately predict, willmean upward pressure on property premiums in particular. “We canalmost be assured that they will come up with new additions to catmodels that will suggest larger exposure to loss on the EastCoast,” Kelly says. “That will continue to put pressure on pricingas we go through 2013.”

But insurers' finances have held up well. “The market was ableto absorb Hurricane Sandy with one quarter of its earnings,” Kellysays. “There's still an abundance of capital.”

Despite the series of natural disasters, he says, “we think themarketplace is able to absorb those losses and is looking torecover on the basis of relatively speaking modest increases andmaybe a little more disciplined underwriting.”

For more on this topic, see Uncertainty Rules Risk Management Outlook and Insurance Rate Increases Seen Remaining Modest.