Adding to a recent drumbeat of news about falling insurance prices, a management firm said today that the property-casualty insurance market will stay soft in 2008 and rates for some lines could decline up to 10 percent.

Premiums "are expected to either decline or remain flat," according to actuarial and risk management experts at Watson Wyatt Worldwide, consulting firm.

The company said insured companies may see enhancements in some coverage, particularly for directors' and officers' liability insurance, and can expect this trend to continue.

Orin Linden, p-c practice leader for Watson Wyatt's New York insurance and financial services consulting group, said: "Rate decreases will be the rule for casualty insurance coverage next year. Strong competition and healthy capacity are forcing insurance companies to lower their premiums or, at the very least, hold them stable. It's clearly a buyer's market."

Mr. Linden estimated that "rates for casualty insurance coverage may decline as much as 5 percent to 10 percent next year, and rates for property insurance coverage will be mostly flat, although some buyers may see a slight reduction. Rates have declined in each of the last few years for both property and casualty insurance coverage as the industry is going through a period of strong profitability."

According to Steve Lawrence, a property and casualty senior consultant with the firm, other segments in the insurance industry--including workers' compensation, directors' and officers' liability, and reinsurance--are also expected to experience soft market conditions.

He said he foresees rates for workers' compensation staying relatively stable as the market remains soft and companies continue to experience strong profitability. "We are expecting to see rates remain unchanged or perhaps decline as much as 5 percent," he added.

Mr. Lawrence also noted a growing interest among insurers and risk managers in using predictive modeling software. In particular, he said, insurers are applying the techniques they use for personal auto to workers' compensation.

This helps risk managers identify potential problems with workers' compensation claims earlier in the process and allows them to implement a settlement strategy to reduce their cost. "Large companies with high volumes of workers' compensation claims are especially drawn to predictive modeling," said Mr. Lawrence.

"With the marketplace showing little sign of hardening, it may be an ideal time for buyers to review their risk management program structure and insurance policies," Mr. Linden counseled. "This will help them decide if key program parameters should remain intact or if alternative risk management solutions, such as insurance captives, should be considered."

"Buyers clearly get better terms in softening markets. However, they need to be well positioned so that when the market firms up, they have a plan to move forward."

Mr. Linden and Mr. Lawrence also suggested buyers who are considering switching carriers analyze the carrier's long-term credit rating, noting that many claims may not be paid out for another six to 10 years.

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Some Lines Seen Declining 10% In 2008

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