"There's a growing sense among the people we talk to that pricing is getting softer in most lines of business, maybe at an accelerating rate over the last two or three months. Most recently, we've heard of some softening of terms and conditions in certain
of the casualty lines. Do you share this view? Have you found a general softening of pricing for the lines of insurance that you're in and has this softening been accelerating of late? Equally important, has there been any loosening of terms and conditions in any of the lines that you're aware of at this point? Can we expect a soft landing in this cycle? And, beyond the cycle, what does this all mean for industry profitabilty?"
Here's an edited and abridged version of what they had to say.
I do believe that pricing has softened and we have communicated to investors on our conference calls that industry pricing in commercial lines continues to soften. The rate of change in pricing has also accelerated a little bit. But the degree to which pricing has softened has not overshadowed the overall level of adequacy of rate of returns, which continue to be attractive.
I would agree with that. Makes me think of the good, the bad, and the ugly. Depending on the niche or market that you're talking about. Some of them are ugly and you have to make some tough decisions. By the same token, there's many places, based on reputation and how you handle the customer, where you're able to continue to do extremely well. I completely agree. It is softening, and most dramatically in commercial
I agree with Chuck in terms of the market we happen to be playing in. The path of deterioration on the commercial side has accelerated over the past couple of months. I think the large cap markets, the standard lines, and the specialty areas have accelerated the most. I think the really insidious part of the deterioration in the large cap casualty market is in terms and conditions and in the types of programs that are being put out there.
Ayer: We need to think about this in three dimensions. Pricing is one aspect. Loss costs is another piece of it. A third is new business, the extent to which a piece of business hits the street Stability of pricing alone does not assure you quality earnings. As underwriters we think in all these dimensions.
TOM SLATTERY is a contributing editor and columnist for
Risk & Insurance®.
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September 1, 2007
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