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Major event needed to disrupt pricing status quo

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What would it take to turn the commercial property insurance market, which is now in its third year of rate cuts?

Maybe more than just a single event, according to observers.

“It's going to take a major unexpected event or events to change the market,” said Joe Tinetti, Zurich North America's New York-based head of property for global corporate in North America.

And how big would that event or series of events need to be?

“We're calling for an event we've never seen,” such as an “outrageous California” earthquake or a direct hit on Miami by a Category 5 hurricane, said Dave Finnis, national property practice leader at Willis North America Inc. in Atlanta.

“The markets that pay that loss have to take corrective action against a market loss that hadn't been experience before,” he said.

He said that underwriters that don't pay for the loss, should it happen, “will see that as an opportunity to pounce,” which in turn would temper any increase from the market.

Mr. Finnis said that an event that occurred outside of the property insurance market could also change the marketplace.

“Something that really takes a hit on the balance sheets of all the companies, like a huge cyber event,” he said.

Hedge fund activity is driving the cheap reinsurance available to the property insurance market, said Mike Martin, executive vice president and general manager of national insurance property at Liberty Mutual Insurance Co. in Boston. He said if the hedge funds decide to put their money into other investments, the hedge fund money would disappear.