How do excess and surplus lines carriers ensure they have anunderwriting profit? A hard market always helps in that it bringsin more cash for the same risks, while also attracting new insuredslooking for the kind of flexible terms and conditions that admittedcompanies might not be willing to supply.

In flat or softening insurance markets, however, the trick forE&S and specialty companies is to maintain the nimbleness thatallows them to grow profitable lines while the getting is good--andwhile other lines turn sour.

Mark Watson III, chief executive officer of the Argonaut Group,put it bluntly at the recent New York Society of Security Analystsinsurance forum, when he told of encounters with industry criticsfor whom hindsight is 20-20.

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