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"One thing buyers should be doing is searching for multiyear deals," Aon Risk Services Managing Director Cecil Cooke said.

He said Aon has developed an underwriting product that locks in rates for three years but gives the insureds some flexibility to negotiate more favorable pricing and terms every year if the market stays soft or softens even further.

As for what happens when the hard market returns, Eric Joost, middle market practice leader with Willis, said anecdotal evidence mainly suggests risk managers will continue with new coverage once they start it, citing employment practices coverage as a likely example.

"The way I look at it is this risk, along with others such as your computer network being exposed, does not really change," Joost said. "As you get your mind around this risk, you are probably not going to chose to leave this product behind."

Jane Musgrave, Midwest middle market practice area leader for Marsh, said any hard market return usually brings some soul-searching when risk managers consider dropping new covers to maintain the core program.

"We obviously are hard pressed to recommend that clients ever drop coverages," she said. "At that point, we would be more likely to say let's adjust deductibles, or just let's try and make this affordable to you within your insurance budget."

But before any risk manager takes into account pricing conditions, there has to be some sort of consensus as to the current state of affairs and how long it will last. Reading such tea leaves makes for endless hours of fascinating conjecture: getting it right definitely has its own rewards.

STEVE TUCKEY has written on insurance issues for a decade for several national media outlets.

August 1, 2008

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