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DALLAS--Rates for all lines of commercial property/casualty insurance continued to decline in June, with an overall average decline of 14% compared with a year earlier, Dallas-based electronic insurance exchange MarketScout reported Thursday.
According to MarketScout, umbrella/excess coverage experienced the largest rate reduction at 16%. Fiduciary and surety experienced the smallest decline, with decreases of 5% each. Generally speaking, the larger the account, the greater the decrease.
But in a statement accompanying the June results, MarketScout Chief Executive Officer Richard Kerr wrote: "The insurance industry continues to improve its financial position, despite rate cuts virtually across the board. There is intense competition for business in the reinsurance sector, generated via traditional channels and from the new opportunities for insurers to spread risk in the capital markets. There was some news of a slight correction in U.S. insurer profits in the second quarter of 2007; however, the correction appears to be insignificant because insurers are continuing to aggressively price their products."
Mr. Kerr predicted that in "the absence of a major hurricane season or other catastrophic event, the property market will remain soft for the foreseeable future. In fact, if the wind doesn't blow this season, property rates will continue to fall. It's going to take an incredibly tough hurricane season coupled with other catastrophic events to turn the soft property market. To turn the market as a whole, a catastrophic property loss event must occur and the tail on liability losses must start impacting insurers' bottom line."
Mr. Kerr noted that the current soft market has now lasted 28 months. "There are no catastrophic property events under way and the tail on liability policies is not yet impacting insurers," he wrote. "We may not have a catastrophic property event for years. The tail on liability losses may not have as much impact as anticipated. In summary, if the losses don't come, this soft market is going to be around for a very long time."