Property-casualty ‘soft market’ to continue for year or two, execs say

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The soft market in property-casualty insurance is likely to continue indefinitely, according to a panel of property-casualty insurance executives.

Nick Cortezi, All Risks

Nick Cortezi

Speaking at Maryland I Day in Linthicum, Md., Nick Cortezi, chief executive officer at All Risks, a national specialty insurer based in Hunt Valley, Md., said he was “pessimistic” about the end of the soft market.

“We are all competing more aggressively with more capital for a pie that keeps shrinking,” he said, explaining why the market is not hardening. “It’s going to take outside forces.”

Robert F. Ohler, senior vice president of Harford Mutual Insurance Cos., a regional insurer based in Bel Air, Md., said he sees “no signs of change,” especially when his company’s April 1 renewals were “soft.”

Some insurers are in essence fueling the soft market, Ohler said.

“There are some [companies] out there trying to garner market share now before a harder market,” he said. “They are trying to capitalize on it now.”

Ohler and Cortezi were joined on the panel by Douglas J. Holtz, a commercial underwriting consultant with Liberty Mutual Insurance in Indianapolis; Michael J. McCartin, president of J.D. McCartin Insurance in College Park, Md.; Thomas Phelan, president and CEO of the Injured Workers Insurance Fund (IWIF) and Al Redmer Jr., president of Landmark Insurance & Financial Group and a former Maryland insurance commissioner. The Independent Insurance Agents of Maryland, the Insurance Women of Baltimore and the Maryland chapter of the CPCU sponsored the event.

Holtz described the current situation as a “treadmill,” fueled by an “opportunistic market.”

Phelan said he has warned the IWIF board that this year might show “a very modest tick up in business,” but that “2010 will be as bad as 2009.” Phelan, who said much of IWIF’s business is tied to construction, doesn’t expect things to improve much until next year. “By the second or third quarter of 2011, things should start to go in the right direction,” he said.

Other factors are tamping rates. Investors “need better results,” and improved data analysis techniques are giving insurers more information than ever to price business and to react to market forces, Cortezi said.

“You know if you are writing a burning book,” Cortezi said, “and you have to move off it.”

For the market to turn, a large-scale event would have to occur, panelists said.

“I think a natural disaster, a natural property disaster, could be a causative event that could turn the market,” Cortezi said.

Cortezi also said he fears the effect of inflation if premiums being paid are unable to cover the cost of inflated claims.

This story originally appeared in the June 2010 print edition of Insurance & Financial Advisor.

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