There appears to be no reason to believe the soft market trends will not continue through 2008, with the insurance industry’s earnings and combined ratio at record levels and outside agencies forcing insurers to take a more conservative approach to their exposures, brokers from Aon said.

In a Web seminar titled “Property Insurance Market Overview” (, Richard Miller, managing director of Aon’s national real estate practice, and Aaron Davis, director of national terrorism and property resources for Aon, discussed the factors currently influencing the market’s direction and where it will go for next year.

Since the hurricane catastrophe year of 2005, the insurance industry has seen a substantial amount of capital coming into the marketplace that has built up and replenished the close to $62 billion loss that year from Hurricanes Katrina, Rita and Wilma, the brokers said.

A combined ratio hovering around 92, which Mr. Davis said has not been seen since the 1920s, and record earnings in 2006 and 2007 continue to draw capital to the market from investors.

New catastrophe models and the scrutiny of rating agencies have forced carriers to spread out their exposures and be more cognizant of their aggregation of risks. Currently, they noted that the industry can probably withstand a loss of up to $30 billion without it affecting the current pricing trend.

What this means is that going into 2008, the executives said, there will be a continued competitive marketplace where large accounts (greater that $4 million in premium) will have the most leverage and enjoy decreased rates of 10 percent or more.

However, the decreases will not translate through the entire market, as small accounts, which do not garner the same leverage, will not enjoy the same percentage of decrease, they explained.

Catastrophe and coastal property risks will see some competition, but Mr. Miller pointed out the improved pricing for clients will be fragmented. There will be more flexibility, and clients can at least expect to see stability in contracts.

He also noted that the current market is “very efficient” and able to apply capacity where it is needed.

“The table is set for a predictable market in 2008, but clients should prepare as if it will be a hard market,” he said.

On the issue of the Terrorism Risk Insurance Act, Mr. Davis said a final version of the bill cannot be expected to come out of Congress until later this year. With opposition from both the White House and Senate, he said the current version of the bill, which includes a 15-year term and lowers the event trigger, will probably not survive. He suggested that the renewed program will more closely resemble the current form.

Without TRIA, he said capacity for terrorism insurance would “dry up overnight.” Of Aon’s customers, close to 65 percent have some form of terrorism coverage, with only 11 percent of that number purchasing standalone.