NU Online News Service, March 8, 11:51 a.m. EST

The soft market continued last month for the property and casualty insurance industry with the composite rate declining 5 percent, MarketScout reported.

The lone exception has been coastal property, which has seen firming in rates, the Dallas-based electronic insurance exchange found.

MarketScout Chief Executive Officer Richard Kerr said rate reductions have held to a pattern over the last six months, declining 4 and 5 percent each month during that span.

"There will always be some changes month to month," he said, "but generally we are seeing a consistent pattern of pricing in most coverage classes."

MarketScout said commercial property, general liability and workers' compensation coverage classes have declined the most--5 percent--while business interruption, directors and officers liability, EPLI, fiduciary and crime have seen the most modest decreases at 1 percent.

Rates for large accounts (defined as having premium between $250,001 and $1 million) declined 7 percent, MarketScout said. The decline, MarketScout explained, reflects the competitive nature of this market segment, driven by the large number of insurers that target accounts of that size and the sharp decrease in the number of exposures.

"As exposures decrease, so does premium," MarketScout said. "In order to hit budget projections, some insurers are choosing to get more competitive on new business opportunities with accounts they feel are well managed and in a desired business class."

Rates for small accounts (premium up to $25,000) declined the least at 3 percent, according to MarketScout, while medium accounts ($25,001-$250,000) and jumbo accounts (over $1 million) both declined 5 percent.

By industry class, rates declined the most for manufacturing, contracting and service, all down 5 percent. Transportation saw the most modest decrease, at 2 percent.

Rounding out the industries monitored by MarketScout, energy and habitational risks both declined 3 percent, while public entity risks declined by 4 percent.

Speaking to the firming in coastal property risks, Mr. Kerr said, property rates were down 5 percent on a national basis and rates for wind insurance in the Gulf Coast, Florida and the East Coast up to and including North Carolina are moderating or increasing.

"Admitted insurance companies in some coastal states are restricted from raising rates beyond a certain point. Some of these insurers feel they are unable to achieve a reasonable premium and are choosing to reduce their exposure because they cannot achieve 'rate adequacy,'" Mr. Kerr said.

He added that while there are rumors that two new entrants will enter the coastal property market before July 2010, rates will not likely reduce because the insurers are entering at a time where they hope to catch rates on the upswing.

"It's a pretty good bet coastal property rates are going to increase soon," Mr. Kerr said.

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