new york (Bloomberg) — Insurance companies are spreading their risk to more firms as they shy away from poorly capitalised companies, said the head of the reinsurance unit at Aspen Insurance Holdings Ltd.

Insurers are dropping or scaling back coverage they buy from less-capitalised reinsurers, a trend that will increase the price of protection sold by stronger firms through 2009, said Brian Boornazian, the president of Aspen Re for the Bermuda-based insurer.

"We are seeing some companies be removed from placements on renewals, or having their lines reduced," Boornazian said in an interview yesterday. "It's provided opportunity for well capitalised players to gain access to business they may have wanted in the past — but it's been locked up by maybe a larger carrier who now isn't able to take as large a share, or any share at all."

Insurers and reinsurers suffered from investment losses in the past two years, which pushed down the value of assets they hold to pay claims and led to more than $125 billion in write-downs and credit losses. Boornazian didn't mention any insurers by name.

"Insurers are wanting a more diversified panel of reinsurers to mitigate risk," Boornazian said. "They're working from a more restrictive approved list, yet they want to diversify their reinsurance. The two run counter to one another at the same time that reinsurers are being more selective, and can raise prices, he said.

Reinsurance rates for protecting financial firms' corporate boards from lawsuits have increased by as much as 50 percent, Boornazian said.

Property reinsurance that protects insurers from losses over a predefined limit rose 20 percent in some catastrophe-prone regions, he said. Guy Carpenter & Co., the reinsurance broker owned by Marsh & McLennan Cos., said such coverage rose eight percent globally in the January 1 renewal period.

The increase follows two years of declining rates and comes after US storms and other disasters triggered $50 billion of insured-losses in 2008, the second-most expensive property- catastrophe year on record, said Guy Carpenter, citing figures from Swiss Reinsurance Co.

Bermuda-based XL Capital declined 92 percent in the 12 months through yesterday on investment losses. Transatlantic Holdings Inc., the second-largest reinsurer in the US, plunged 44 percent as parent company American International Group Inc. was bailed out by the US government. The No. 1 US reinsurer is held by billionaire Warren Buffett's Berkshire Hathaway Inc., which dropped 24 percent. Aspen slipped 13 percent.