Soft Market Continues
Factors contributing to the continuing soft pricing trend in the specialty markets include:

Ample product supply. For most classes of business, there is no dearth of insurance companies competing for market share. Even if no new players come into the market, existing carriers may expand their product offerings and/or coverage on current policies to protect their market share.
Ample capital supply. Capital is readily available on most lines of business, and that allows competition at or below expiring policy rates/premiums. Stitik said, "Capacity has not been an issue on casualty business, at least not on accounts we've worked. There is still so much competition that it is not likely this will change anytime soon." That is fairly consistent across most lines of business.
Reduced demand. Demand is adversely impacted by business closings and intact businesses reducing policy limits and/or coverage. Wright noted, "I am seeing a couple of risks a week that are either going out of business or deciding not to buy some or all of the coverage they had last year. It is not a huge percent of the book — maybe five percent — but it is still a factor."

Brokers appear resigned to the idea that rate increases on most classes will not happen to any measurable extent in 2009. Also adversely affecting agency revenue is the pullback by policyholders trying to lower their costs by asking for less coverage, higher deductible and/or lower limits. However, at least some of those customers are now rethinking that position, according to Wright. "This year, more than ever, we saw a lot more risks that elected to go without wind coverage. But now that we are into hurricane season, we are seeing more and more requests for wind coverage from existing accounts and new ones."

Special Reports /

Challenging Year for Specialty Markets

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