The U.S. property and casualty insurance market remains softoverall, with prices down by an average of 6 percent inJuly–unchanged from the previous month, according to the latest“Market Barometer” survey by an electronic insurance exchange.

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“We are still in a prolonged softmarket,” said a statement from Richard Kerr, chief executiveofficer of Dallas-based MarketScout, who reported that surpluslines insurers are now sitting on the sidelines during the ratedownturn.

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“Many insurance brokers expected tighter terms and increasedpricing after the July 1 treaty renewals,” said Mr. Kerr.“Generally speaking, it didn't happen. July 1 renewals were a bittougher for property-cat risks, but most reinsurance treaties wereplaced without much trouble.”

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The market is firmer than last year at this time, however, withthe Market Barometer recording an average drop in rates of 11percent in June 2008.

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Still, the soft market is taking its toll, as “several majorsurplus lines insurers have decided to wait it out until theadmitted market exits what is traditionally considered the surpluslines market,” according to Mr. Kerr.

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“This strategy will be very wise if the market starts to turnand the larger admitted insurers begin restricting their appetite,”he said. “However, if we have the status quo, some surplus linescompanies could lose significant market share, which will be nearlyimpossible to replace. After all, most state insurance regulatorsrequire agents and brokers to use an admitted insurer if one isavailable, at any price.”

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The only changes MarketScout found in pricing by industry classwere for contractors and energy accounts. Rates moderated slightlyfor contracting risks.

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Energy risks, the firm found, corrected more notably, adjustingfrom an average rate reduction of 5 percent in June to 3 percent inJuly. “The economic recession has significantly impacted the priceof oil and natural gas,” noted Mr. Kerr. “These commodities are offtheir 2008 highs by well over 50 percent. The resulting decrease inactivity has significantly impacted the premiums received byinsurers.”

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He added that “as long-tail claims mature, the ongoing premiumflow is not going to be robust enough to generate acceptablereturns at current rate levels. Thus, we expect continued rateadjustments in the energy sector, with an overall rate increase byyear's end.”

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By coverage class, rates were down:

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o 7 percent for general liability.

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o 6 percent for workers' compensation and professionalliability.

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o 5 percent for commercial property, business-owners andcommercial auto.

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o 4 percent for business interruption, inland marine, umbrellaexcess and surety.

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o 3 percent for employment practices liability and crime.

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o 2 percent for directors and officers, as well asfiduciary.

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By account size, MarketScout said prices overall were down:

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o 4 percent for small accounts (up to $25,000 in premium).

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o 6 percent for medium accounts ($25,001-to-$250,000).

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o 6 percent for large accounts ($250,001 to $1 million).

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o 5 percent for jumbo accounts (over $1 million).

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By sector the report found manufacturing, contracting andservice rates all down 6 percent; while habitational, public entityand transportation fell 5 percent.

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MarketScout said it calculates U.S. p&c market conditions byanalyzing data amalgamated at its insurance exchange (www.marketscout.com) and via in-person surveysconducted by The National Alliance for Insurance Education andResearch.

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