Research firm Conning says all signs point to a deterioratingliability-insurance market.

“The U.S. liability-insurance front has been relatively quiet inrecent years,” says analyst Jerry Theodorou in a statement.“Decreasing loss frequency and an ample reserve position havesupported satisfactory results even in the face of falling premiumrates in the past decade's soft market.”

However, says Theodorou, “the benign period for Liabilityinsurance results may be coming to an end.”

An inflection point may have been reached for loss frequency,tort filings and reserve releases, says Conning.

General-liability rates fell by about 41 percent during thesoft-market years of 2005-2011. Rates are on the rise, butmodestly.

Meanwhile, the rate of decrease in loss frequency for otherlines of liability “is slowing and appears to be bottoming” in theoccurrence form, says Conning, and frequency in the claims-madeform has increased.

Additionally, the “pattern of reserve releases in recent yearswill likely see the reserve cycle soon pass the inflection pointfrom redundancy to deficiency,” according to the study.

Legal challenges by plaintiffs' attorneys surrounding thedefinition of “occurrence” have resulted in woes for insurers.There is also more litigation for D&O and E&O carriers, asplaintiffs' attorneys retool after having been set back by sometort-reform legislation.

“New practice areas with potentially rich pools are emerging toreplace the dried-up streams,” says Conning.

Conning found that the most successful liability insurers, usingcombined ratio as a measuring stick, were E&S insurers.Multiline insurers with a strong E&S focus were the second-bestperformers.

Conning's “Liability and Tort Trends: Trouble Around theCorner?” is available at conningresearch.com.