The continued soft market was a common thread that tied ourmonthly newsletters together this year. Nearly every issue wedelivered in 2008 had an article forecasting when it would end ordetailing strategies of specialty lines market participants to copewith existing conditions.

One common theme that emerged in our discussions with E&Sinsurance company executives was that the 2008 soft market wasunlike others they had lived through.

“What is different about this soft market is theunpredictability,” said Robert Lala, senior vice president ofprimary casualty for Liberty International Underwriters in Chicago.“In past soft markets, you could name who was doing what, and youknew which accounts you were going to have a chance of writing withgood terms.”

“There's just no predictability to it,” he added–even in termsof guessing which companies will be aggressive. “Companies youthought were very staunch in their underwriting now will open upthe floodgates. Others who you thought would open up the floodgatesare holding their ground.”

Scott Bayer, senior vice president for the casualty division ofValiant Insurance in New York, gave a similar assessment.

“What we've found is that we have to wind our way through allthe accounts that come in the door to really see where there's anopportunity,” he said. “Where we may have success with one account,we may see a very similar one come in, but there's noopportunity–depending on the distribution, how it's marketed, whatthe prior carrier has done.”

“The consistencies really aren't there,” according to Mr. Bayer.“You've just got to roll up your sleeves and dive in to figure outwhere there is opportunity.”

One predictable element of this year's soft market was that thisone, like those of the past, brought new competitors to thespecialty lines space–and existing players lamented that they hadto dig even deeper for opportunities to write business.

“You're being bombarded on one side with standard marketsreemerging and taking part of the E&S traditional market.You've got unbelievable new capacity from Bermuda, London oronshore here in the United States,” said Paul Springman, presidentand chief operating officer of Deerfield, Ill.-based Markel Corp.We reported his comments in a June article about a panel discussionat AAMGA University Weekend East held earlier in the year.

Weeks later, participants in one particular specialtymarket–employment practices liability insurance–grumbled as theyrevealed the existence of a new competitor from the standard marketthat had taken them by surprise: Progressive, the Mayfield Village,Ohio-based personal auto insurer.

Also surprising to NU was the revelation that MEMIC, a Portland,Me.-based workers' compensation insurance group, had introduced aninnovative coverage pairing of EPLI and workers comp insurance.

Giving our readers a different perspective, we devoted the leadspot of our July newsletter over to the new competitors in anarticle where they revealed their motivations and details of theirprograms–”Workers' Comp, Auto Carriers Launch Cheaper EPLI CoverOptions.”

Published at a time when the price of gasoline was soaring, wereported that MEMIC's coverage for small employers–with a policycost as low as $32 per employee–could cost some firms less than afull tank of gas for a minivan.

More recently, E&S/Specialty Lines Extra presented profilesof five new competitors in the U.S. E&S and specialty linesmarkets: Montpelier U.S. in our September edition; IronshoreInsurance, Max Specialty and Naxos Insurance in October; andValiant Insurance Group in November. All but New York-based Naxoshave roots in Bermuda.

How did E&S insurers survive in the face of all thiscompetition?

“We all have to be better hunters…We have to have sharperspears. We have to run farther, and we're still going to eat less,”said Patricia Roberts, president and chief executive officer ofGeneral Star in Stamford, Conn., who participated on the AAMGAUniversity Panel with Mr. Springman and Tom Nerney, president andCEO of Wayne, Pa.-based United States Liability InsuranceGroup.

“If yesterday a tough product that you were writing was a craneoperator with horrible losses, now a standard carrier is pickingthat up. That's buffalo that's not in your real estateanymore.”

In the June article quoting Ms. Roberts' advice, “BusinessStrategies Vary Widely Among Specialty Carriers In SofteningMarket,” Mr. Springman and Mr. Nerney distinguished their businessstrategies from one another, with Mr. Springman highlightingMarkel's passion for individual-account underwriting and Mr. Nerneyexplaining USLI's mission “to be the best insurance company writingsmall-premium accounts,” with 101 different products to fitsubmissions into underwriting boxes.

Our coverage of E&S insurer strategies continued in theSept. 8 edition of NU magazine, detailing approaches includingglobal expansion at Argo Group, internal reorganization at Markel,and product diversification strategies at American Safety andLIU.

In last month's e-newsletter, industry veterans' Nathan Warde,president of Aspen Specialty, and Larry Frakes, president and CEOof United America Indemnity, Ltd., described their soft-marketstrategies, highlighting changes in their risk appetites andrebuilding efforts they separately embarked on at their companiessince taking on their positions in 2007.

(Editor's Note: Some subscribers to the E&S newsletter werenot able to view the article about United America and AspenSpecialty in the November edition. The full article is availablethis month as a related link below.)