SCOTTSDALE, Ariz.—The prolonged soft pricing environment is not expected to turn in 2010, but at least one specialty underwriter said he hopes buyers are spared triple-digit increases when it does turn.

During a question-and-answer session at the National Assn. of Professional Surplus Lines Offices Ltd.'s Mid-Year Leadership Forum this month in Scottsdale, Ariz., specialty underwriters and wholesalers participating in a panel were asked if they feared that a market turn would drive policyholders to the self-insurance market due to the difficult economy.

“I think that's a serious risk we face,” said John Latham, managing director-regional wholesale operations for Markel Corp. in Richmond, Va.

He noted that when pricing has turned in the past, the market has imposed 300% price increases. “We seem to do that time after time, the same way we cut prices five or six years running to get to the same point,” Mr. Latham said. “We're probably our own worst enemy in a lot of those cases. I think we've got to somehow learn to create a little more consistency in the peaks and valleys in our industry, but I've been thinking that for over 40 years and I haven't seen a lot of progress.”

E.G. Lassiter, chairman and CEO of RSUI Group Inc. in Atlanta, who also participated in the panel, pointed out that the industry hasn't reacted with too many 200% to 300% price increases—with the exception of 2006, after the previous year's Hurricanes Katrina, Rita and Wilma.

“We're a capital-providing industry; and when supply contracts as it did post those hurricanes, there was not enough global capacity to insure the amount of wind exposure properties that were out there and prices did go up,” Mr. Lassiter said. “But overall, that was very, very unusual for that to have occurred.”

While he said he doesn't see price increases of that magnitude occurring with RSUI's long-term clients, those that went to the admitted market and had their programs underpriced may indeed get 200% to 300% increases.

Neal Abernathy, president and CEO of Atlanta-based wholesaler Swett & Crawford Group Inc., said regardless of any price increases that might occur, he thinks the economy will continue to play the biggest role in insurance purchasing, at least in the near future.

“In the first part of last year, specifically in property, the market was trying to edge its way up and the insured would say, "I paid $1 million in coverage last year and the most I can pay this year is $800,000. I don't care what your price is, I can only pay $800,000.' I think we'll stay in that environment for a good while,” Mr. Abernathy said.

Matthew Power, executive vp of Lexington Insurance Co. in Boston, noted that the insurance industry has been “eviscerated” by the economy in terms of exposures.

“A lot of the key industries that really drive (excess and surplus lines) exposures are very stressed,” Mr. Power said, specifically citing the construction and trucking industries. Economic recovery is “going to be a very, very slow process.”

“I think that's why we've got to work very hard to cut as much expense out of our transactions as we possibly can,” Markel's Mr. Latham said.

“In my career, I've never seen a market where you're dealing with an economy that we're dealing with today,” he said. “The economy will bounce back slowly and, when it does, we're going to have to work with insureds. Ultimately, they've got to be able to spread the risk and we have to find a way to efficiently help them do that.”