What little difference a year makes.

In fact, insurers say about the only difference between the year-end 1996 and 1995 renewal seasons is the year on the calendar.

And there's little reason to think the 1997 year-end renewal season will look much different when it rolls around 11 months hence.

Rates for virtually all property and casualty lines remain soft, capacity remains abundant and surplus is growing. There's little geographic disparity in market conditions. Although new products are fueling growth for some underwriters, all insurers are scrambling to find ways to hold down costs.

As Michael L. Downs, senior vp at Hartford, Conn.-based Hartford Steam Boiler Inspection & Insurance Co. put it: "I think the market of today will be the market of the future, and we're going to have to learn to live with it."

"Generally speaking, I would say that it's all soft. I don't see any differentiation," said David McDonald, chief underwriting officer of Royal Insurance Group in Charlotte, N.C.

"The pricing levels today are as soft as they were in 1983," said Mr. McDonald.

"I think the market is as soft as it's ever been. We don't anticipate any change in the marketplace," said Mark Owens, executive vp in the marketing division of Reliance National in New York.

"The lines of insurance that from our perspective we're seeing the most pressure on are the excess and surplus lines, the primary, the excess," Mr. Owens said.

"Certainly the excess is competitive," said Brian Duperreault, chairman and chief executive officer of ACE Ltd. in Hamilton, Bermuda. "And I'm not sure there are really that many new players involved, but Lloyd's is particularly competitive on the energy side."

"What we're seeing in the marketplace is continued flat rates," said Paul J. Krump, senior vp and managing director at Chubb & Son Inc. in Warren, N.J.

"People are saying it's a great time to be a buyer." Faced with the competitive market, customers are asking, "Why don't we check and make certain that we've got the right type of coverage in place, that we've got the right carrier," he said.

"I don't think anybody is getting surprised by a major increase in their rates this year," Mr. Krump said. With rates so competitive, Chubb is focusing on such aspects as identifying customers' exposure increases, making sure they have the proper coverage in place and marketing its loss-control services.

The general liability market is "just as soft if not softer than in 1995. The pricing has gotten almost to the point where you ask how much more can you cut. The pressure now is on coverage enhancements, unusual modifications and deletions of exclusions," said Tom Swensen, vp-underwriting and marketing services for Wausau Insurance Cos. in Wausau, Wis.

"It's clearly a buyers' market," Mr. Swensen said. Brokers have come up with "some very comprehensive" wish lists and are very aggressive in seeking the terms they want.

"We look at it from a standpoint of we try to be selective as to which enhancements or modifications we will make. Rather than make them across the board, we will try to tailor the enhancements based on the individual account," he said.

As an example of the type of terms sought, Mr. Swensen said brokers are seeking modifications in pollution exclusions. "As much as a particular broker may be asking for this modification across the board of all accounts, it's imperative that the insurance company look at it on a selective basis," he said.

Dennis Kane, president of CIGNA Property & Casualty's Special Risk Facilities in Philadelphia, put a more positive spin on conditions.

Looking at the overall property/casualty market, he saw "obviously a pretty positive picture."

That perspective is based on key indicators, he said. For example, industry surplus grew about 20% in 1996 from 1995, to about $230 billion. "So that's sort of the first sign that things are generally pretty good," Mr. Kane said. "Couple that with a strong performance in industry income. I think most companies are reporting improved operating income."

Also contributing to a positive picture is the fact that over the past two years some companies like CIGNA have taken "major steps to address asbestos and environmental," Mr. Kane said.

"From the big picture view there's very little pressure for change," Mr. Kane said. So the market of 1997 should be very similar to the markets of 1995 and 1996.

According to Stephen J. Sills, president and chief underwriting officer of Executive Risk Inc. in Simsbury, Conn., this renewal season's market is very much the same as year-end 1995's in terms of rates and capacity, and there seems little chance that will change in the foreseeable future.

Perhaps the biggest change in the marketplace, then, is the growing importance of factors other than price in purchasing decisions, Mr. Sills said. "Prices have gone down and they might still go down further, but I think a key issue is the deliverables from an insurance company other than price," he said.

Such aspects as speed of delivery and other factors that can help a broker cut its expenses in dealing with the insurer are becoming ever more important, he said. "From that standpoint the issue of how can an insurer get a policy out in a few days is becoming important," said Mr. Sills.

CIGNA's Mr. Kane said primary casualty coverage is an area where typically programs provide a high degree of service and some risk transfer. This area has been very competitive for the past three or four years, he said. "There's not a lot of investment income associated with this because of the program design where the customer self-insures a large part of their exposures." Because profit margins in this area are thin, he expects to see some underwriters move to stabilize rates in this area.

Mr. Kane said he sees customers beginning to demand better service, so companies able to provide the service demanded at competitive rates will have an advantage.

The primary casualty market may be a mixed bag for the next year, "but if there's going to be a change in terms of the upward adjustment of rates, we'd probably see it in this segment first," Mr. Kane said.

The market for excess casualty has been very competitive over the past few years and remains so, Mr. Kane said. "This is very much a long-tail business. It's hard to imagine any short-term needs that would effect a change in market conditions."

Chubb recently increased its casualty capacity to $50 million from $25 million, "just to be more responsive to agents and brokers." Mr. Krump said the company thinks that move will help position it as a "one-stop shop" for a customer's entire range of casualty coverages.

Workers compensation rates are dropping as well, Mr. Krump said, adding, though, that the extent of those declines varies by state.

The boiler and machinery marketplace also is mired in softness.

"In the large account area, there's really a diminishing boiler and machinery market; it's becoming an all-risk market because of the client's desire to have a package and eliminate the potential for gaps," said Hartford Steam Boiler's Mr. Downs.

This all-risk market operates very much like the commercial property market, with mostly single-year contracts, although a few buyers have gone to fixed multi-year contracts, he said.

Rates are continuing to soften with the tremendous increase of capacity in the domestic and overseas markets.

Prices for the all-risk policies are down 5% to 15% from the levels of a year ago, he said.

Insurers looking to make up for soft casualty prices in the property market are finding little more than disappointment.

Wausau's Mr. Swensen called the commercial property market "softer than soft." The insurer is cautious not to congregate a lot of exposure in a given area, he said.

As in the case of liability coverages, buyers are interested in coverage enhancements rather than simply price cuts, he said. "Reductions have been pushed so far that there isn't a lot left there" to cut, he said.

"Even the cat lines, property, are softening up compared to what it was," said Reliance's Mr. Owens. "I don't want to characterize it as 'the cat market is becoming soft,' but the longer people forget about North-ridge the softer it becomes," he said, referring to the devastating 1994 earthquake that struck the North-ridge section of Los Angeles.

"Except for the obvious places," such as coastal exposures, property rates were soft, said Royal's Mr. McDonald. "But even that in the last quarter, prices began to move southward, as they say. It's an extraordinary market," he said.

"Reinsurance capacity even on the property side is abundant and generally speaking, prices for catastrophe cover as well as casualty cover are coming down," said Mr. McDonald. He said underwriters that have enjoyed favorable catastrophe experience are seeing catastrophe reinsurance rate reductions of 10% to 13%.

CIGNA's Mr. Kane pointed out four distinct categories of property insurance buyers who can expect to experience varying conditions.

For customers in areas prone to earthquakes, hurricanes or spring flooding, the prospect for a change in market conditions is "probably not very great," Mr. Kane said. Rates should be stable, and there's even some additional capacity in earthquake-prone areas.

For petrochemical risks, "we've seen about two years of rate reductions in the petrochemical market, and my best guess is rates are probably in line for where they need to be for a very catastrophe-prone area, and we'll probably see rates stabilize there," the CIGNA executive said.

Few underwriters specialize in writing utility property covers, Mr. Kane noted. Rates in the utility area probably will remain stable, though there are some concerns among insurers about what impact utility deregulation might have.

Heavy industrial risks are "the one area we see some upward pressure on rates," Mr. Kane said. Many insurers' performance in this area hasn't been particularly strong in recent years, and Mr. Kane sees underwriters looking at increasing deductibles or maybe increasing the waiting time on business interruption claims. He couldn't provide any across-the-board idea on the extent of those rate increases, however, instead saying any changes will be "account-specific."

Underwriters reported there is very little differentiation among casualty risks in terms of softness.

From a regional perspective, while the entire U.S. market is competitive, some areas are more so. "The whole country is pretty competitive, but we see a lot more competition in the West and the South," said Mr. Owens of Reliance.

"Even overseas is becoming more competitive," he said. "We're seeing a lot more competition in Europe. It's the age-old thing-there's too much capacity out there."

Given the impact of nearly a decade of soft market conditions, the challenge for all insurers is to find new areas in which to grow, said Mr. Owens.

"But everybody says that; everybody wants to be a niche player," he said.

Not surprisingly, one of the chief ways insurers are responding to the continued soft market is by rolling out new products, pointed out several underwriters.

Among the new products offered or demanded, multi-year/multi-line products remain among the most prominent, Mr. Kane said. "We continue to see a high level of customer interest in these products despite the more competitive nature of the traditional market."

ACE's Mr. Duperreault said his company has had a good response to its multi-year/multi-line products since it started offering them in early 1995. "Is it a growing trend? Maybe," he said. "I think a lot of insureds are rethinking their programs once again. A soft market tends to produce a rethinking of structures."

While allowing that an argument can be made that customers would take advantage of a soft market to buy traditional coverages, Mr. Duperreault said, "We see a lot of insureds saying, 'We want a longer term relationship, more stability,' and these programs tend to give them that."

Chubb's Mr. Krump said there's a lot of interest among customers for employment practices liability products. Chubb introduced an EPL product in 1996 and, while satisfied with market response to it so far, Chubb would like to see it do better in 1997. But such products often have a relatively long gestation period, with risk managers first needing to become familiar with them, then working the cost of the coverage into their budgets, he added.

EPL products appear to be much in demand, agreed Executive Risk's Mr. Sills. A product Executive Risk unveiled in 1996 called The Power combines employment practices coverage with directors and officers and entity coverage for privately held for-profit companies. "It's been very hot," Mr. Sills said.

Wausau's Mr. Swensen said the underwriter also has an EPL product under consideration but has not introduced it.

Chubb also is emphasizing increasing its business with mid-size multinational companies, pointed out Mr. Krump. "Anything we can do to differentiate ourselves or separate ourselves from the pack is something we're trying to emphasize," Mr. Krump said.

With offices in 29 countries and the company's capacity and underwriting expertise, that emphasis on multinational business is a natural fit for Chubb, Mr. Krump said. "When we make it easier for the agent and the insured to do business with us (overseas), it plays better for us back in the United States.

"We're seeing more packaging of traditional products together," Mr. Krump said. "And the whole theme of making it easier for the agent and the broker and the customer buying the product."

In addition, "We're certainly seeing much more partnering going on with agents and brokers in the marketplace," Mr. Krump said. Agents and brokers seeing the consolidation among insurers are concerned about the long-term nature of the market. "They're concerned about who's going to be a long-term survivor," he said. "They're identifying those companies they believe are going to be in the marketplace long-term and are looking to form stronger bonds with those companies."

And the pace of merger and acquisitions activity isn't likely to slow down soon, said Reliance's Mr. Owens.

"Consolidation is still on the horizon," he said. Merger and acquisition activity ultimately may affect the market, he said, "but I don't think anybody has figured out how and when and why."

But while consolidation might continue, Mr. Duperreault doesn't see it lessening competition in a market with seemingly no shortage of capacity. "I frankly don't see consolidation as much of a solution," he said. "I don't think that takes the capital out."

The capital markets' convergence with insurance is something that "will eventually happen," as well, said CIGNA's Mr. Kane. "To date most of the activity we have seen has been in the reinsurance side, and I think underwriters have been struggling with, 'How can we take some of these concepts and apply them to individual customers' programs to try to develop more innovative solutions?'*" CIGNA is working toward that end, he said.

As insurers' struggle to find ways in which they can compete more effectively, electronic communications are taking on an ever greater role, Mr. Sills said. He said his company's World Wide Web site is "seeing a lot of hits." Within the next few weeks, interested parties will be able to download applications of policy forms from the site, he said.

Among the advantages such electronic systems bring to the renewal process are speed, an opportunity to save postage and mail room costs, streamlining the overall process "and making the buying process that much more efficient and effective," Mr. Sills said.

"The front end of the process has become more and more important in terms of giving people a competitive edge," Mr. Sills said. "If we can help (the broker) become more effective that gives us a leg up."

But no matter what the current market conditions, the basic business of insurance remains the same, said Royal's Mr. McDonald.

"At the end of the day, we're still in a business where we are assuming risk, and the most important ingredient is risk selection, understanding the needs of the ultimate buyer and are you willing to meet those needs for a fair price," he said.