BOSTON--While there are differences between the current softmarket and previous periods of rate declines, some destructiveinsurer behavior never seems to change, a group of reinsuranceactuaries suggested here.

Listing market pressures for reinsurers that distinguish thecurrent soft market, Elizabeth Mitchell, president, PlatinumUnderwriters Reinsurance in New York, noted that ceding companiesare increasing retentions and that the reinsurance market, whilesoft, seems harder than the primary market.

That's "not typical of previous soft markets," she said,referring to a more typical earlier slide in the discipline ofreinsurers.

"Historically, we've seen ceding companies use reinsurance morein soft markets, and we aren't seeing that today," she added, alsonoting that reverse phenomenon--in which "ceding companies areperfectly willing to retain more"--has actually accelerated sinceJan. 1.

"You'll hear things like, 'We'll keep it net unless you'rewilling to pay some really high and egregious ceding commission forthe right to write my reinsurance,' to which many of us are saying,'Thank you very kindly, but we'll pass.'"

The "disconnect" between the reinsurance and primary markets"has gotten so bad that there are still contracts from May 1 thatare not placed," she said. "There is increasing pressure on brokersto get deals done at terms that the reinsurance markets are simplynot willing to accept."

Commenting on conditions in the primary market, she said thatsince January 1, the ceding companies are more confident that theirmargins are good, which is leading them to be willing to decreaserates.

"It's also leading to the phenomenon where they're startingsomething new," she said, referring to ventures into areas ofinsurance they haven't written before.

"Everyone argues that they're going to exercise...discipline,but when you have five or 10 new markets in someone else'sbackyard, you cannot help but have extreme competition on rates andterms and conditions," she said.

Ms. Mitchell said that primary market competition--particularlyon large capacity risks on both the property and casualty side, aswell as excess and surplus lines risks--has "really started toaccelerate."

Rate drops for these risks were in the mid-to-high single digitsthrough the end of January, but now they're "hovering aroundminus-20 percent--and everyone can point out the minus-50 orminus-60 percent risk."

"In addition, we are just starting to see the softening ofterms...something that actuaries struggle with how to reflect, butcan nevertheless be much more painful when they slip--and much moreeffective when they tighten" in terms of how the impact loss costs,she said.

Steve Kelner, managing director, casualty for Swiss Re inArmonk, N.Y., said primary rate levels are now reminiscent oflevels at the end of 2001 and early in 2002 for most casualtyrisks.

"If pricing is at those levels, we've got an issue about maybehaving inflation on the loss side," he said, noting that "simplefundamentals" of actuarial work would suggest that pricing shouldkeep pace with inflation.

The cycle "feels like the same cycle but with a different storybehind it this time," he said. "There's always a new era--a newreason why there's not irrational behavior," he said, noting thatcommentators point to Sarbanes-Oxley (and its impact on reservingpractices, perhaps making them more adequate), better systems andbetter data as factors distinguishing the current cycle.

"I don't buy it. We've got the same cycle. We've got the samedouble-digit rate decreases since the second half of 2004. And eachtime we've gone through the cycle, we understate the impact of ratedecreases."

"We talk about discipline, but I don't think we actually seediscipline to the degree we should yet," he said, noting thatindustry forecasters "tend to converge toward means--and toestimate toward a nice staid number" of overall profit.

While there are many public messages suggesting that "that thisis a sensible market," Mr. Kelner said, "I also see a lot of fingerpointing," referring to the conversations he has with primarycompanies he visits on underwriting audits.

"Our rate change is minus-small number. But when we losebusiness, it's minus-big number," they say, he reported, notingthat he challenges them on this because they can't be winning newbusiness at "minus-small."

They respond, "Yes, but our underwriting is better," hesaid.

Mr. Kelner said, "We had 160 underwriting audits last year, andnobody said their underwriting was worse."

"Everybody said their rate change is minus-small number. Butsomebody is writing minus-big number business, and it's not gettinginto the rate changes being reported," he said.

John F. Rathgeber, president and chief executive officer of ArchReinsurance Company in Morristown, N.J., joined the drumbeat ofnegative commentary.

"We're in a pretty bad place right now. Ironically, it's becausegood results of the last two years [brought us here]. Capital inthe industry is about 80 percent above where it was in year-end2001," he noted.

Like Ms. Mitchell, he reviewed the shrinking reinsurance pool,supplying some numbers to underscore the impact of increasingprimary company cessions.