A View From The Press Box

Despite the fact that insurers didn’t suffer a single major hurricane loss this year, property-catastrophe pricing appears to be relatively stable for the coming renewal season--if only because both primary and reinsurance carriers are still licking their wounds after two straight years of record disaster claims.

In addition, while it was a huge relief that Mother Nature did not repeat herself this year after 2004’s grand slam of four hurricanes and 2005’s record Katrina loss, as they say in the stock market, prior results are no guarantee of future performance.

That means that as long as the exposure remains--with building still booming along the coasts, and property values sky high despite the end of the housing bubble—look for carriers to continue writing rationally in disaster-prone regions.

However, all bets appear to be off when it comes to most casualty lines. Overall, the market is definitely on the way down, with the average property-casualty rate dropping 9 percent in November, according to MarketScout’s monthly “barometer.”

J. Patrick Gallagher, president and CEO of the mega-brokerage bearing his family’s name, told NU recently that he expects the market to “soften like crazy” outside of cat risks.

Still, some remain skeptical that things are as bad for sellers as they seem outside of property markets.

"The pricing pressure is not as severe as what's being reported," insists William Berkley, chairman of W.R. Berkley Corp. "I think we've got a lot of people crying wolf right now. And there's no significant slippage in terms and conditions."

Mr. Berkley trashed the reliability of pricing surveys—particularly those that query brokers sore after losing business. "If they bothered to ask companies, they'd find, in general, [price cuts are] not so terrible,” he said on a panel at the 18th Annual Executive Conference for the Property-Casualty Industry. However, even he conceded there might be some pressure on large casualty risks.

When another panelist raised the specter of the industry being poised on a "slippery slope" in terms of pricing, Mr. Berkley said "a slippery slope implies a decline that is rapid and uncontrolled. We're not there yet."

But others are sticking to their guns. V.J. Dowling, managing partner of Hartford-based Dowling & Partners Securities--who joined Mr. Berkley on the conference panel, and was the good-natured target of some of his complaints--insisted that broker surveys are at least “directionally correct," and back up insurer studies confirming a downward trend in prices.

Still others are more cynical as to whether insurers can resist the temptation to follow the market down as prices continue falling. Edmund Kelly, chairman, president and CEO of Boston-based Liberty Mutual, in his keynote address at the p-c conference, said that while prices are “acceptable” right now, and competitive behavior is "not too bad," he remains "concerned” that “history will repeat itself.”

“I have no reason to believe that the industry will be any better in this cycle than it was in the last cycle," he said, adding that the industry behaves "like an alcoholic that is cured until he passes the next bar."

He said he is worried that excess capital floating around the industry "will undoubtedly trigger undisciplined pricing and unreasonable competition."

So, how long do you think insurers will hold out, or is it already too late?