Investors who entered the insurance market to take advantage of anticipated rate increases following last year?s hurricanes must diversify or face significant losses in the 2006 hurricane season.

?With an active hurricane season forecast for 2006, investors hoping to make a quick return on North American business are likely to be unlucky. They will need to build a more diverse global portfolio of business if they want to avoid significant losses when the hurricane season starts,? said Oliver Schofield, director of Aon?s Global Property Practice Group.

Mr. Schofield sounded the warning on the release of the first issue of Aon?s Global Property Market Tracker which noted that last year?s terrorism incidents as well as its record natural disasters failed to end the slide in international property insurance rates.

And he said that while the Bermuda market successfully charged higher rates on their USA book, they did not achieve their anticipated rate increases for non-US domiciled exposures.

?There is now a realisation that if they want to maintain a global diversity in their portfolio they will need to soften their current rating stance towards their non-USA clients,? the bulletin said.

Aon noted that the insurance industry was able to withstand the losses in 2005 due to a generally healthy investment climate and the influx of some $18 billion of new capital to support existing and start-up insurers and reinsurers. As such, unlike the post 9/11 period, the bulletin noted that insurers had enough capital on their books not to raise prices.

The bulletin from Aon?s London office, which is aimed at tracking changing dynamics of non-marine property insurance around the world, noted that most organisations headquartered outside the US have enjoyed further reductions on last year?s rates due to the continuation of a softening property market.

While non-US- headquartered companies with exposures in the US have endured price increases, reductions on the rest of their global property placements have resulted in savings overall, the report said.

The average rate for international property risks saw an increase in average reduction from 14 percent to 17 percent over the course of 2005, but the bulletin noted US non-marine property rates moved from an average mid-year decrease of 10 percent to an average increase of 37 percent by the year end in the wake of hurricanes Katrina, Rita and Wilma.

Non-marine property premiums are likely to continue their downward trend this year and the bottom of the cycle may not be felt until the end of 2007. Rates for US-based risks however are currently increasing between 20 percent to 40 percent for those clients with catastrophe exposures. For clients with no catastrophe exposures rates are generally stable, Aon said.

Mr. Schofield said: ?A clear divide is opening up between US and international risks and this is likely to be a main feature of the global property market in the coming year.?

In Asia, customer loyalty to insurance partners remains strong and Aon found little evidence of clients changing insurers to find a lower price. Property rates continue to fall in most countries by up to 20 percent, the bulletin said.

Buyers in Europe are the ?most price sensitive? with Aon noting a general expectation that rates will continue to fall steadily throughout 2006 although the degree of reduction varies from country to country. Capacity across Europe remains in plentiful supply, especially for good risks, the bulletin said.

?Underwriters are charging more for USA exposed locations, but overall costs are reducing. There is no pressure being put on buyers to increase retentions and those companies that are willing to take a higher retention are being rewarded with further premium reductions.?

Despite being hit hard by last year?s hurricanes, the bulletin noted that underwriters in the London market continue to offer aggressive rates for well risk managed business outside the US while Canadian insurers are not passing increases in treaty reinsurance costs on to clients.

?Rate reductions are available although inevitably the market is charging more for US catastrophe cover,? the report said.

In the US, Aon said rates are increasing across the board for those clients that have catastrophe exposures, ranging between 20 percent to 40 percent. Carriers are limiting cover for catastrophe perils driven by reduced treaty capacity.

?Programmes are being restructured to mitigate premium hikes although prices are still going up, particularly where incumbent markets choose not to renew.

?For clients with no catastrophe exposures, the picture is different: rates are generally stable although some buyers experienced smaller rate increases or even small rate reductions in their recent renewals,? Aon said.