Dan Carmichael, chief executive officer of Ohio Casualty Corp., responded first, saying he was worried about how soft the market will become. “I don't worry much about cat [catastrophe risk]. What I do worry about is [whether] the models that we put in place [are] really going to carry us forward,” he said, referring specifically to multivariate rating programs used in personal lines.

Mr. Dowling followed with a string of comments outlining his concerns about the casualty market.

“When London underwriters start telling me they're coming over to get a piece of that nice, stable U.S. casualty business, I get worried,” he said. He went on to identify other factors contributing to his concerns about casualty lines, including:

o Sarbanes-Oxley pressures to report earnings that are closer to ultimate results (with little fat in reserves to buoy future profits).

o Short-term thinking on Wall Street.

o Offshore competitors that can write on a tax-advantaged basis.

o Stable claims trends that may soon turn.

Mr. Berkley responded that Mr. Dowling's reports, published in a weekly analysis known as IBNR Weekly, “refer to broker surveys with an awesome level of confidence.”

“Ninety-five percent of all statistics are made up,” contends the CEO of Greenwich, Conn.-based W.R. Berkley, speculating on how the figures in broker surveys are obtained. If you call a broker on a day when he just lost a piece of business to a company charging 20 percent lower rates, and ask that broker how rates are holding up, he'll say the market is “terrible,” Mr. Berkley related.

“If they bothered to ask companies, they'd find, in general, they're not so terrible,” he said–adding, however, that there is some pricing pressure on large casualty risks.

He likened the situation in the market today to conditions that existed in 1988. “I thought I saw this terrible pricing pressure and stopped…growing,” he said, listing this as “the stupidest thing” he'd ever done.

Mr. Dowling said that while he also had concerns with broker surveys, “they are directionally correct” and in line with insurer surveys showing the same downward trend in prices.

Even if rates are only down a couple of points, “what happens if we get loss costs going [up]?” he asked. A high-80s combined ratio can get to breakeven “pretty quickly with a few points of rate reduction and some underlying loss cost inflation,” he said.

Later, Edmund Kelly, chairman, president and CEO of Boston-based Liberty Mutual, delivering the keynote address, listed his own set of concerns about the industry, among them the current level of capital and its potential impact.

While there is some downward pressure on prices, surprisingly it is “benign right now,” competitive behavior is “not too bad,” and market prices remain “acceptable,” Mr. Kelly said.

“I am concerned, however, that… history will repeat itself. I have no reason to believe that the industry will be any better in this cycle than it was in the last cycle,” he said, adding that the industry behaves “like an alcoholic that is cured until he passes the next bar.”

Excess capital “will undoubtedly trigger undisciplined pricing and unreasonable competition,” he said.

Mr. Berkley, when asked to identify the most worrisome risk, spoke not about the level of capital, but the potentially temporary nature of funds coming from sidecars and other arrangements that are not classic insurance vehicles.

Noting that some companies are “betting their survival” on new entities backed by lengthy contracts, Mr. Berkley asked: “How will those 65-to-70 page documents play out if something goes wrong?”

“I'm uncomfortable when I have to rely on a long document,” he said. While there will be places to use them, “I don't think we've figured out yet…what happens for a second or third event, the unexpected event or unanticipated type of loss,” he said.

Joseph Brown, non-executive chairman of Seattle-based Safeco and executive chair of Armonk, N.Y.-based MBIA, countered that the new vehicles have some positive consequences. “They are bringing capital market efficiencies to other players in the market,” he said. “You don't have to use them directly for them to have an effect,” he added–suggesting, for example, that their existence eats into the profits of some reinsurance behemoths such as Berkshire's National Indemnity, and is “keeping the market honest in terms of capital returns.”

While Mr. Brown noted the ability of capital to move in at an accelerated pace–potentially shortening the length of the insurance cycle–Mr. Berkley posed questions about how quickly such capital will move out. “What happens when the first event happens and you've used up your financial transaction, and those players don't want to come back in? A second event happens and you're naked,” he said.

In spite of the speed of capital coming in, Mr. Carmichael noted there's still a significant shortfall in Florida, which opens the door for the government to come into the insurance business. At the same time, some large companies that “overwrote” in cat-prone areas are asking for government help, he added, referring to calls by Allstate for a national catastrophe fund.

Mr. Brown and Mr. Dowling both pointed out that some companies are turning to financial vehicles for event-specific coverage to satisfy more stringent rating agency models.

“By their models, the rating agencies are engaging in some pretty heavy-duty social engineering,” Mr. Brown added. He said rating agency model changes have “essentially put target zones in certain states in situations where they no longer can support their own cat exposures.”

“That's what's being dramatized by these vehicles,” he said, adding that it has also fueled calls for assistance–such as one from outgoing California insurance commissioner John Garamendi at the same conference last year, asking for help from other states to handle earthquake exposure.

Another area of concern discussed by the panel was the fact that competitors in the foreign markets–particularly those in Bermuda–have a competitive advantage over U.S. companies because they don't pay the same level of taxes.

“My goal is to get those guys to pay their fair share of taxes. It's my number one compensation goal for 2007,” Mr. Berkley said, directing his comments to “everyone who owns stock in a Bermuda company.”

Mr. Berkley reported that a foreign competitor that wrote a similar amount of U.S. commercial business last year paid only $19 million in taxes, while W.R. Berkley paid $260 million.

He said making his case that foreign counterparts should pay comparable tax amounts won't be a hard sell in Washington. Seemingly outlining his pitch to federal lawmakers, he said companies in Bermuda and other offshore locations can outsource their processing jobs to places like India, leaving no business here beyond shell companies collecting U.S. dollars.

At a later session, Edward Noonan, chairman of Bermuda-based Validus Reinsurance, responded, saying that “Bermuda plays a vital role in financing American risk competitors,” and that Bermuda has its own local tax regime.

Changing tax rules to create a more level playing field, he said, would “only increase the cost of risk to the United States,” adding that U.S. companies “would be hard-pressed to deliver Bermuda capacity.”

Another Bermuda player, John Charman, CEO of Axis Capital, said: “We are where the capital wants us to be.”

However, at a separate meeting in New York last week, a Bermuda CEO warned that if Mr. Berkley succeeds in convincing federal lawmakers to levy U.S. taxes on Bermuda insurers, “a lot of people will suffer.”

Accusing Mr. Berkley of “Bermuda-trashing” and building on misperceptions about the Bermuda market, Donald Kramer, chairman and CEO of Bermuda-based Ariel Reinsurance, said: “I don't know how he forgot or ignored the fact that $22 billion in claims was paid and sent back to the United States following the storms of 2005″ by Bermuda companies.

Mr. Kramer said he was directly responding to a remark Mr. Berkley made during the Credit Suisse First Boston conference on Nov. 17. The remark, which Mr. Kramer quoted verbatim, was: “'My goal is to level the playing field so those free riders in Bermuda don't get to suck our money out and give us nothing back.'”

“Boy, that was really hostile,” Mr. Kramer said during his keynote speech at a joint luncheon of the Association of Professional Insurance Women and the Insurance Brokers Association of the State of New York.

At the Credit Suisse conference, Mr. Berkley said he had already set up meetings with Congressman Charles Rangel, D-New York, Senator Max Baucus, D-Montana, and five other Senate and House leaders. Noting that his company has been working on a draft bill to present to the lawmakers, he said, “We're going to hand it to them. My first meeting is Monday.”

Characterizing Mr. Berkley's view as “myopic,” Mr. Kramer took note of other remarks Mr. Berkley made during the Credit Suisse conference, explaining why his company is not in the catastrophe business.

“We haven't found ways to get appropriate risk-adjusted returns,” Mr. Berkley said. “If we're going to accept volatility, we want to be paid.”

Mr. Kramer responded: “Bermuda accepts 50 percent of the world's cat business at those unattractive risk-adjusted returns. It stands to reason that if you accept [Mr. Berkley's] premise for not writing the business, then premiums sent to Bermuda are transferring risk on very favorable terms. That doesn't square with [the] comment that we're free riders.”

If the Democratic Congress isn't smart enough to ignore Mr. Berkley's proposal, then lawmakers will be “choking off the supply of property reinsurance, which Mr. Berkley himself won't write [and] a lot of people will suffer,” he said, noting later that both the Florida insurance commissioner and Gov. Jeb Bush made trips to Bermuda because of property insurance issues in their state.