NU Online News Service, Jan. 28, 10:56 a.m. EST

This year's insurance market prices should remain stable, as they were in 2009, despite a belief that during the first half a hard market turn was on the way, Marsh brokerage said.

Those findings were in a market report the firm released yesterday titled, "Competition Nets Rewards, U.S. Insurance Market 2010, It's About Your Risk,"

Marsh said the insurance market in 2009 reflected intense competition among insures, increased capacity and fewer insured catastrophe losses and is poised to do it again in 2010.

A few lines, such as directors and officers insurance for financial services, bucked the soft market trend, but generally the insurance market avoided the hard market predictions of earlier in the year.

Insurers understood customer willingness to market their accounts, Marsh said, and brokers were able to use that fear of losing accounts to get better prices for a client's risk or terms and conditions.

Commercial property insurance in the United States is expected to remain stable, provided there is not a major catastrophe, the report said.

Soft market and stable conditions are also expected to remain for other lines of business for the coming year, Marsh added.

During a Web seminar discussing the insurance marketplace, Joe McSweeny, president of Marsh's U.S. and Canada divisions said that the major challenge for insurers this year will be maintaining profitable business as the old earnings model has proven itself not to be that reliable.

"This recession has made it clear that investment earnings cannot be viewed as a consistently reliable source of significant earnings that insurers traditionally [expect] them to be," said Mr. McSweeny.

"That means they will be motivated to work hard to achieve underwriting profitability and risk appropriate rates. This will be the biggest challenge for insurers in my opinion, in 2010 as broad based hardening of rates is not expected in the near term," he advised.

Steve Weisbart III, chief economist for the Insurance Information Institute, also a participant in the seminar, said the industry's results, while an improvement over 2008, were not necessarily the result of good management but a light catastrophe loss year with better improved earnings.

"Those outcomes cannot be expected to continue," he said.

There will be pressure on insurers to achieve underwriting profitability, and a hard market will come, it's just a question of when, he explained.

During this soft market period, policyholders should look to find ways to reduce their risk profile and put themselves in an advantageous position when the hard market finally does arrive, Mr. Weisbart said.

Concerns that insurers would be forced to position themselves with more expense over regulatory issues seems to be subsiding, he noted, but there continues to be pressure for the United States to speak with one voice when it comes to dealing with international regulatory issues.

It would be advantageous for the United States to develop a single, internationally recognized accounting standard, when it comes to insurance, thereby making it easier for investors to understand their business compared to other businesses, advised Mr. Weisbart.

On one hand, the easier comparisons could make more investors willing to invest in the industry or allow insurers to meet stricter capital requirements regulators might impose, he suggested. However, some critics fear one standard could make insurers financial reporting more volatile and make capital "less willing to go to insurance. And that would be a terrible outcome," Mr. Weisbart said.

Copies of Marsh's report are online at www.marsh.com.

Special Reports /

Market Prices For 2010 Should Be Stable, Brokerage Reports

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