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How do you know when the insurance market has been soft too long?

When risk managers begin to feel sorry for their underwriters.

"The market looks soft, soft," said June H. Dickinson, vp and risk manager at SunTrust Banks Inc. in Atlanta. "It's good for us, we just hope it's not too bad for the industry."

No one is expecting risk managers in a burst of altruism to begin paying higher premiums than required. And insurers aren't yet begging for alms.

But Ms. Dickinson's concern highlights the longevity of a cheap marketplace that is keeping coverage costs low and insurers scrambling for business.

"The whole market for primary general liability and property is down," said Gail J. Wilson, vp-insurance for KFC National Purchasing Cooperative, the Louisville, Ky.-based company that purchases goods for Kentucky Fried Chicken franchises. "It's kind of surprising, because it seems there are fewer insurers out there but competition continues to be very great. Everybody knows you can get it cheaper out there from someone, so it pays to look."

Although rates aren't expected to rise any time soon, Ms. Wilson and other buyers have some worries about the long-term effect that insurer consolidations could bring.

"Insurer consolidations should be a concern for all of us because it has to decrease availability," she said.

There have been no ill effects for PepsiCo Restaurant Services Group from insurer consolidation, but there may yet be, said Christopher Mandel, the Louisville, Ky.-based director, risk management at the restaurant company. "I see it coming, in less choice."

In the meantime, buyers continue to write smaller checks on renewal dates or accept higher limits or better terms at expiring rates.

Oglethorpe Power Corp. in Tucker, Ga., renewed property coverage with Arkwright Insurance Co. for facilities valued at $960 million-$20 million higher than in 1996-at rates unchanged from last year, according to Dolores Anderson, risk manager with Intellisource Services Solutions in Atlanta.

The placement covers property owned by Oglethorpe Power and two companies that have been split from the utility in anticipation of deregulation of the utility industry. The spinoffs are Georgia Transmission Corp. and Georgia System Operations Corp., both of Atlanta.

Ms. Anderson, who became an employee of Intellisource when her position as risk management coordinator with Oglethorpe Power was outsourced, said she was "pleased to have rates remain stable," particularly in light of the significant rate reduction the utility gained at its 1996 renewal.

The property coverage includes a variety of deductibles beginning at $100,000, Ms. Anderson said.

"The market is very interested in writing property," said Nick Parillo, vp of risk management at Columbia Gas System Inc., a Reston, Va.-based pipeline and energy company that produces and distributes energy products to residential and commercial customers.

"Overall, rates are stable," he added. "However, I'm hopeful that I'll be able to enhance coverage."

Mr. Parillo said, for example, that he hopes to increase coverage for business interruption risks while keeping the cost of the insurance stable.

Columbia Gas retains the first $750,000 of its property program in its Bermuda captive, Columbia Insurance Co. Ltd.

"The most impressive part of renewals is that virtually all markets we visited were listening, not preaching, and viewing me as a customer," Mr. Parillo reported. "They were keenly interested in providing value-added services to enhance basic coverages."

Mr. Mandel is busy buying coverage for what is becoming the largest restaurant company in the world and is finding rates to his liking.

PepsiCo Restaurant Services Group parent PepsiCo Inc. is exiting the restaurant business and spinning off the restaurant group into a separate, as yet unnamed company. The new company will operate current PepsiCo units Pizza Hut Inc., KFC Corp. and Taco Bell.

Keeping a $1.5 million self-insured retention, Mr. Mandel placed international property coverage for the new company in the London market at favorable rates. Domestic property coverages should be in place by the time the new company is expected to begin operating in early October.

"It's kind of more of the same," Mr. Mandel said of this year's renewal season. "There are no significant differences from a year ago or even two years ago. It's a continuing market softness."

There are exceptions to the soft property market for some risk managers.

Burlington Industries Inc. in Greensboro, N.C., expects higher rates and some restrictions to its property coverage because of last year's losses from Hurricane Fran, according to Gerard McCabe, director of risk management for the manufacturer of textiles, apparel and home furnishings.

The storm damaged 26 of the company's plants, with losses totaling nearly $3 million. The coverage package written by Royal Insurance Co. about a month before the storm carried a $100,000 per occurrence deductible.

"We are seeing more inland hurricane damage than we would have anticipated," Mr. McCabe said. He has heard some insurers may be broadening the definition of coastal property to 300 miles inland from 100 miles, especially after their experience with Hurricanes Fran and Hugo.

Mr. McCabe is awaiting a quote from Royal and anticipates perhaps higher rates as well as an increased deductible from $100,000 to $250,000 or $500,000. Another possible change could be lower sublimits for risks subject to floods, windstorm and earthquake, he said.

Risk managers are finding insurers as competitive on the liability side as with property insurance.

"The market in general is still soft for casualty" risks, said Mr. Mandel.

Mr. Parillo of Columbia Gas agreed. "From a rate standpoint, we believe the market is very stable. Things are relatively flat."

Columbia Gas for the first time this year bought legal liability coverage to protect its 40 to 50 in-house lawyers, he said.

Some buyers are finding significant savings on liability insurance, as well as improved coverage terms.

Hormel Foods Corp. in Austin, Minn., obtained "a drastic reduction" of about 50% in premium costs for combined low- and high-layer excess liability coverages, said Grant Johnson, risk manager for the food processor and distributor.

Hormel's liability insurance program consists of a $1 million self-insured retention followed by a $110 million umbrella. The first $10 million of the umbrella is placed with American Re-Insurance Co.

Coverage enhancements on the excess program for Hormel include a guaranteed premium on a three-year policy with no auditing if there is no material change in operations, according to Mr. Johnson.

New terms for the first time allow an entity other than Hormel to pay all or part of the company's self-insured retention. So, for example, if Hormel sued a third party and won, that award could be applied to fulfill the requirement of Hormel's SIR.

Mr. Johnson said several factors helped Hormel in coverage negotiations, including a competitive marketplace; the company's good claims-handling procedures; and a long-standing relationship with the lead excess insurer, American Re-Insurance Co., which has not been called on to pay a claim since signing on in 1991.

"It's a very, very competitive market out there," he said. Hormel ratcheted the competition a notch higher by having two brokers compete for the excess placement. J&H Marsh & McLennan Inc. retained the account in favor of The Hays Group Inc. of Minneapolis.

Mr. Johnson said he is finding more insurers willing to write coverage for contaminated products this year and expects the increased competition to cause premiums to drop significantly. The insurance covers losses related to accidental contamination as well as product tampering.

KFC National Purchasing Cooperative operates a small insurance agency that writes health and property/casualty coverages for KFC franchisees. The subsidiary hopes to begin offering product contamination coverage soon that would protect franchises from a loss of business due to media reports of problems, whether true or unfounded, Ms. Wilson said.

SunTrust renewed most of its liability coverages with premium reductions, according to Ms. Dickinson.

The company buys primary property/casualty coverages for its 29 banks and a number of non-bank financial services companies from Professional Surety Corp., a Madison, Ga.-based insurer owned by SunTrust.

Ms. Dickinson explained that the insurer's rates track those of the rest of the property/casualty market and prices are kept in check partly because "SunTrust is a pretty good risk."

SunTrust's excess liability coverages are written by several insurers, including units of The St. Paul Cos. Inc. and National Union Fire Insurance Co. of Pittsburgh, Pa., a unit of American International Group Inc.

"I've found the marketplace very receptive," said Richard H. Saylor, insurance and risk manager at Coca-Cola Beverages Ltd. in Toronto.

Liability and commercial automobile renewals placed by Sedgwick Group P.L.C. and written by General Accident P.L.C. went off without a hitch at favorable prices for the same limits, he noted.

Oglethorpe Power's Ms. Anderson said she was concerned that the utility's spinoff into three separate companies would result in a big overall price hike for liability insurance. That didn't happen.

There was only a slight increase in the cost for three companies as opposed to one, Ms. Anderson said. "There was not any significant increase in dollars in doing that."

Liability exposures for three entities are covered at the same limits as they were when they were part of one company, Ms. Anderson explained. St. Paul writes the underlying coverages while the excess insurer is Associated Electric & Gas Insurance Services Ltd.

As the market for employment practices liability coverage matures, more buyers are considering adding it to their insurance portfolios.

The coverage "is becoming much more available, and rates and deductibles are going down," said KFC's Ms. Wilson.

Mr. Johnson of Hormel and Mr. McCabe of Burlington said they plan to take a closer look in the future at buying employment practices liability insurance.