The firm said its analysis found that when carriers accumulated large sums of cash, premium rates began to fall as companies sought to become competitive once again.

Under this scenario, CC&Co. predicts that premium rate increases should decline "from 15 to 20 percent in 2003 to mid-single digits in 2004."

This shift, the firm said, would result in diminished performance for brokerage firms. Brokers could expect to see revenue growth to drop 50 percent and earnings to drop 30 percent in 2004.

In a telephone interview with National Underwriter, Adam Klauber, managing director of equity research and the report's author, said that the 30 to 45 percent revenue increases brokers have experienced during this hard market were driven by increased commission from the rate increases.

Mr. Klauber said the loss from premium increases would affect 25 percent of their growth in the future. He also noted that in the past year there have not been any major mergers or acquisitions among brokers, which was another major driver in their revenue growth.

"We have just not seen any big acquisitions this year, which indicates the market has become more competitive," said Mr. Klauber. "Brokers have gotten bigger. It's a size proposition, there's limited opportunities in the $50 million and up acquisition range. As these companies have gotten to $400, $500 million, up to $2 billion in revenue, there are not many acquisitions left that can make an incremental difference [to their revenue]."

However, the insurance brokers are not in trouble, just seeing a deceleration of growth.

"[Brokers] are decelerating off of 10-year highs," he said. "They are still going to average a reasonable rate of growth. For the sector, they will average 13 to 15 percent growth rate, and for most financial sectors that's pretty solid growth rate."

He said over the next two years, into 2005, the industry would be going into a moderating phase of premium growth, noting that there is still "a lot of weakness in the primary markets." However, he pointed out that reinsurers should see marked improvements in their books as they move away from the underwriting difficulties of the late 90's and 2001.