I imagine that the folks who purchase coverage for large schedules of property along the Gulf Coast or in Florida might have a word or two to say about this MarketWatch article:
The “hard” property insurance market that started in 2006 has ended as premiums fall and coverage broadens, broker Willis Group said on Wednesday.[...]
Record losses from Hurricanes Katrina, Rita and Wilma in 2005 sparked a surge in property catastrophe rates. But there weren’t many big storms in 2006. That made last year probably the most profitable in the history of the insurance industry, Willis said. As 2007 began, insurers and reinsurers had about $150 billion in extra capital to underwrite risks, the broker added. That’s sparked more competition among insurers, pressuring premiums.[...]
“Except for insurance against natural catastrophes, the marketplace in May 2007 is softening and the rate at which it is softening seems to be accelerating every day,” Willis said in its report. “There is vigorous competition, rates are falling and there is more capacity.”
However, [AIG CEO] Sullivan noted that the terms and conditions of insurance policies are being maintained, which makes this period different from the soft insurance market of the late 1990s.
“Deductibles are holding reasonably well and your policy terms and conditions and the way wordings are being scripted have not changed significantly and I think that is an important differentiator,” he said. “We are not going to follow the market down, we have made it quite clear to our underwriters.”
That T&C’s are being maintained is some comfort. The industry has had a repeated history of doing silly/stupid things in the name of competition, being burned when a major catastrophe strikes, and of losing the public relations war when pricing and contract language is cleaned up in the aftermath.