Willis also said it expects policyholders to consider using their increased buying power to reduce deductibles to a level which provides "a higher degree of comfort."

In its survey of over 50 insurers, Willis said most underwriters are not admitting to broadening of coverage terms, which stands in contrast to almost all business the broker said it has seen this year.

Willis said it expects coverage terms to continue to improve across all classes of business--in particular, professional indemnity and directors and officers insurance. "[But] in most cases considerable negotiation is required to obtain the best product," the firm said.

Willis went on to say that a key indicator of the state of the market in 2005 was the reinsurance renewal season, which occurred at the beginning of the year for most underwriters.

The broker said it understands that most underwriters obtained treaty renewal terms at the same rate as last year. However, in some cases, reinsurers were able to impose some wording restrictions.

"This suggests that the slight market softening we see at the moment has been heavily influenced by the influx of new competition as opposed to underwriters being able to reduce their own expenses," said Willis.

Looking forward, Willis said that securities settlements in several large bankruptcy scandals, such as Enron, WorldCom and Parmalat, could impact the soft-market cycle related to financial services lines, causing a hard-market turn and making the current soft-market cycle short lived.

"We feel it is important to point out, however, that there is still a degree of uncertainty when this could take place and, indeed, how far reaching the effects will be to financial institutions that do not have exposure to these sorts of events," Willis added.