Rates are falling for most professionals buying errors and omissions liability insurance--including some risks with past losses--and terms and conditions are improving, according to market executives.

"There's definitely some healthy competition in the market," said Lisa Butera, the New York-based president of the professional liability division at National Union Fire Insurance Co. of Pittsburgh, Pa., a subsidiary of American International Group Inc.

The competition has been stoked by about a half-dozen new insurers that entered the market during the last six months of 2006, as well as the new capacity that existing market players have added over the past year, Ms. Butera said.

Among technology, telecommunications, media and other companies in the E&O sector, rates dropped 10% to 15% during July 1 renewals, said Daniel Wadley, the New York-based managing director and co-leader of the E&O practice at Marsh Inc.

Rate cuts were accelerating, however, for large accounts with few or no losses, he said.

In some circumstances--most notably for middle-market media companies such as regional newspapers and small broadcasters--accounts could negotiate 20% or greater rate cuts, he said.

Business processing outsourcing, consulting, media, property management, staffing, technology and telecommunications companies--which make up much of Aon Corp.'s E&O book of business--typically negotiated 15% rate cuts if they are "good risks," said Pat Donnelly, the Chicago-based co-national managing director of professional risk solutions at the Aon Financial Service Group unit.

Some mutual fund firms have been able to negotiate up to 30% reductions off the high rates they had faced for years because of losses related to their market-timing and fee claims, said Paul Kim, a New York-based managing director in the Aon Financial Institutions unit.

But funds with a checkered loss history continue to face higher rates than do funds with a pristine loss history, he said.

Other mutual funds--which most often purchase joint limits covering their investment advisors' E&O exposure and the funds' directors and officers liability exposures--have been able to reduce their rates 5% to 15%, Mr. Kim said.

Rates for the miscellaneous, nonlicensed professional risks that National Union covers--including technology companies and school and public officials--are dropping from the "high single digits to the low double digits," Ms. Butera said.

Rates fell 5% to 10%--about double the reduction from a year ago--for the E&O book of business at Chubb Specialty Insurance, a unit of Warren, N.J.-based Chubb Corp., according to Michael Phillips, vp-worldwide miscellaneous E&O product manager. The biggest part of Chubb's E&O book consists of management consultants, benefit plan administrators, claims adjusters, collection agents and property managers, Mr. Phillips said.

For the complex miscellaneous professional liability risks that Willis Group Ltd. handles, rates are flat to 5% lower, said Paul Miskovich, a senior vp in New York. The largest classes of business in that group consist of data processors and providers of system and integrated business solutions.

Law firms also have been able to obtain rate cuts. Large firms are negotiating 5% to 10% rate cuts, Mr. Wadley said. But insurers are competing more aggressively for middle-market firms--those with 250 or fewer attorneys--offering them 15% to 20% rate cuts, he said.

The architects and engineers sector is experiencing a similar market dynamic, according to Mr. Wadley. Rates for the largest firms are flat to 10% lower, while those with less than $20 million of revenue are seeing 20% to 25% rate cuts.

Risks that could not negotiate significant rate cuts were actuarial firms and large systems integration companies providing strategic consulting or outsourcing services, Mr. Donnelly said. Underwriters are concerned about past losses and the potential for more among those risks.

In addition, manufacturers of semiconductors, consumer electronics and passive components such as resistors and capacitors were able to negotiate flat rates at best and had to assume higher retentions, at least $5 million, said Willis' Mr. Miskovich.

The most significant change in terms and conditions for buyers is underwriters' willingness to cover--for additional premium--third-party claims, customer notification costs and regulatory defense costs related to computer network security breaches and the loss of private data for an additional premium, market executives agreed.

Underwriters in the past six months also have been willing to cover the loss of data contained in media--such as tapes and laptops--that are lost in transit, Mr. Miskovich noted.

Insurers also are softening or willing to eliminate the hammer clause for attorneys, Mr. Wadley said. Under that clause, coverage is capped at the amount that a plaintiff initially would have settled a case that, after the offer is rejected, eventually is resolved for a greater amount.

In addition, some insurers have been willing to drop the market-timing exclusion in their E&O policies for mutual funds, Aon's Mr. Kim said.