From Insurance Journal today:
While few can reportedly argue with price adequacy and the level of earnings improvements within the commercial sector today, A.M. Best’s outlook is prospective in nature and takes into consideration the future consequences of price softening and the assumption that terms and conditions have already been compromised in certain segments of the market. This outlook also recognizes the effects of internal and external pressures on optimizing capital, market overcrowding and the ever present potential for irrational behavior.
Based on these assumptions, A.M. Best is concerned with this sector’s ability to sustain any new pricing momentum over the long term. Although Hurricane Katrina may have helped stall further price cutting in the commercial property segment, its impact on commercial casualty pricing is likely to be modest.
I suspect that some businesses and commercial property owners along the Gulf Coast might debate Best’s forecasts, but I’d have to agree that that is largely a regional phenomenon.
I guess I should start bracing for my underwriters to start telling stupid competitor stories like they do whenever the market begins believing that size is everything. (Here’s a hint: while size may help dilute the expense ratios, triple-digit combineds hurt regardless of whether you’re huge or tiny.)