Rich DeSimone, president of Travelers Ocean Marine, echoed that sentiment. “One of the things about the ocean marine business is that it's relatively easy to get into,” he said. “Most of our business is nonfiled and lightly regulated, so there's not a huge barrier for entry.”

On the other hand, however enticing the ease of entry may be, Mr. DeSimone and Mr. Fitzgerald both warned that the realities of the business may not measure up to the expectations of those joining the party.

“I think there's a misconception that there's been a significant profit over the last couple of years, when really the results publicized are on a financial-year basis, not on an underwriting-year basis,” said Mr. Fitzgerald. He noted that because of this misconception, some of the new capacity is entering the market looking at results “that are probably the efforts of two years ago as opposed to right now.”

Mr. DeSimone said another problem that new entrants experience is the existing competition in the marketplace.

“I think that while the [perceived] opportunity might be there for someone…to get into the marketplace, their challenge also is that the ocean marine marketplace is a very well-established market with plenty of capacity, and what [new entrants] bring to the market more often than not is just a lower price, which doesn't really add a lot of value.”

It does, though, as Mr. Fitzgerald noted, drive down prices and soften the market. “The new capacity is coming into an already competitive market, and is just forcing that competitive market to get more competitive,” he explained.

Or, as the recent Willis Group Holdings report on the 2007 ocean marine market–ominously titled “Defying Gravity”–puts it: “As more capacity joins the market despite deteriorating loss records, pressure is being brought to bear on insurers to abandon existing underwriting stances and compete more vigorously for premium income and market share.”

As for the ramifications of this new capacity, Mr. Fitzgerald said that “I definitely feel like the margins were already thin, so the recent pressure has definitely put certain segments on the brink, if not already into a loss position for insurers.”

The new capacity comes from a variety of sources, according to those queried. Mr. DeSimone said some of the capacity is coming from Bermuda, some from London, and some from managing general agencies with new markets.

Mr. Fitzgerald said much of the new capacity is being generated by experienced and responsible carriers, but the market pressures in the segment are driving prices down nonetheless. “A lot of the new competition is actually [made up of] experienced individuals for the most part,” he noted. “But there's a natural pressure to service the capital that is being provided, and that's forcing undisciplined underwriting.”

As Mr. DeSimone noted, “All you need is a few people to start pushing the market in the wrong direction.”

He also said the AIG/CV Starr split has created new competition and new capacity, contributing to the competitiveness of the market. After CV Starr separated, Mr. DeSimone said, it hired a marine team and started to compete for AIG's book of business, “which had an impact on the balance of the marketplace.”

He noted that this is just one factor among many that has impacted rates in the ocean marine segment.

With the soft market well underway in ocean marine, carriers have been competing all across the various lines of available coverage. The Willis report notes that competition is fierce in international hull insurance, despite the fact that losses in this area have been steadily rising.

Mr. DeSimone attributed this to market conditions rather than sound underwriting decisions. “[Hull] hasn't had a really good run of profitability in a long time, and there seems to be a level of competition there that doesn't make any sense at all, so that's being driven more by market forces than by logic,” he said.

The Willis report points to an increase in the average size of hull claims (which is due to the larger size of vessels) and to an increase in the cost of steel and the use of scarce repair facilities.

Mr. DeSimone said globalization, growth in world trade, and the economic emergence of areas such as China and India are driving the demand for more and larger vessels.

“Right now, if you go around the world and look at the shipyards, every single one of them is full,” he said. “There are even shipyards in China called 'green-field shipyards' where they have orders to build ships, but all that's there right now is not even a shipyard but a green field.”

He added that “the challenge to marine underwriters is these vessels are getting larger and larger. Carrier capacity of the container vessels keeps expanding to a point where concentration of risk is becoming a greater and greater challenge.”

The Willis report also points to an increase in crew negligence claims–an area that Mr. DeSimone and Mr. Fitzgerald also cited as problematic.

The Willis report states: “To date, 2007 has seen major hull losses running at an almost unprecedented level since the high-profile structural failures amongst the aging bulk carrier fleet in the 1980s. If nothing else, this may dispel once and for all any doubts about the need for good seamanship, as a modern vessel in poor hands is no match for an older, well-maintained vessel in the hands of a highly experienced crew.”

Mr. Fitzgerald added that “crew turnover is one of the major challenges any vessel operator has right now.”

Liberty International Underwriters, he said, attempts to mitigate risks associated with the crew by employing on-staff marine risk engineers.

“We spend time getting to know our clients thoroughly, and that includes understanding our pledge to training crew and retaining crew,” he said. “And we show a preference to those clients that can demonstrate that they've acknowledged the risk of crew turnover and crew training, and that can only be developed via the 'getting to know you' process.”

(Mr. DeSimone details the problems of shortages in competent crew in the sidebar accompanying this story.)

Aside from risks involving larger vessels and issues with crew competence, other marine exposures close to land have evolved. Recent news reports have noted an increase in pirate attacks–particularly off the coast of Somalia–and Mr. Fitzgerald said there has been an increase of 14 percent in these kinds of incidents in the first nine months of this year compared with the same time period last year.

Additionally, both Mr. Fitzgerald and Mr. Fleming pointed to the complexities of insuring oil rigs, with Mr. Fleming mentioning their exposure to hurricanes–a risk factor that has been getting a lot of attention in many markets since 2005–and Mr. Fitzgerald explaining that drilling is occurring in depths of water that have not been entered into before.

“The risk complexity is definitely increasing,” Mr. Fitzgerald said.

Among other ocean marine coverages, the crown jewel of the market remains cargo. As Mr. Fitzgerald explained, it is a billion-dollar market, and premiums on average are around the $25,000 mark. Simply stated, cargo is the largest segment in the U.S. ocean marine market.

“You can't ignore it. You need to try and be a player in it because that's where the bulk of the premium is,” noted Mr. Fitzgerald.

Indeed, it has not been ignored. The Willis report states: “If the hull market could be described as softening gently, for the cargo market, one can forget the word 'gently.' The combination of improving loss records and new entrants to the cargo market has combined to produce the most dramatic fall in rating levels in living memory.”

To compete in the cargo market, according to Mr. DeSimone, insurers have begun to offer coverage that would not normally exist in a hard market.

Patrick Fleming, branch manager of the Pittsburgh office of Jimcor Agencies, a managing general agent, said one of these coverages is “stock throughput.” This policy offers continuous coverage, Mr. Fleming said, from the moment the cargo leaves the dock, to the ship, to the truck and all the way to the shelf.

Sharon Emek, a partner with CBS Coverage Group, an independent agency in New York, and former chair of the Independent Insurance Agents and Brokers of New York, said coverages as comprehensive as stock throughput are available in a hard market but are much more difficult to find than they are now.

With heavy competition on price and coverage all across ocean marine, carriers are left trying to balance underwriting responsibility with the need to maintain market share.

To survive the soft market, Mr. Fitzgerald said Liberty International Underwriters has set itself up to compete with other carriers on price by cutting costs in other areas–namely, by reducing underwriting expenses.

The insurer has launched an online platform called “LIUcargo.com” that automates the binding and policy-issuing processes. “We still have good dialogue between the broker and underwriter during the submission phase,” Mr. Fitzgerald said, but he added that the new platform reduces the overall burden on personnel while also increasing company efficiency.

Mr. DeSimone said Travelers maintains discipline in the soft market even if it means losing some business. He noted that the company's portfolio leans more toward middle-market business, where competition is under less pressure than larger business.

Companies are not the only ones competing in this market, as Mr. Fitzgerald noted that broker competition is “as fierce as in underwriting right now. I think it's the simple fact that both are trying to service capital.” He added, “I don't remember broker competition being as fierce” in the previous soft market.

Speaking from a broker's perspective, Ms. Emek said that more carriers are actively seeking out independent agents now than in the hard market, when carriers might have been more inclined to go through a managing general agent.

But the increased number of available carriers comes with its own risks, Ms. Emek noted, warning that agents need to be aware of which carriers understand the exposures involved in this market and which ones do not. “If we find that [a carrier is] giving us a rate that's so far lower, we're really hesitant to write with them,” she explained.

If carriers are getting headaches competing in the soft market, Ms. Emek said clients are very happy. Some buyers, she noted, are down a few hundred thousand dollars in costs as a result of competition in the marine insurance market. “Even on the low end,” she said, “I'd say customers over the last year are saving 10, 20, 30 percent–depending on the kind of risk.”

Signs for the future within the ocean marine segment seem to point to an inevitable correction that will hurt some of the players in this market.

Mr. DeSimone believes the correction will come sooner rather than later. The downturn of the market, he said, was quicker than the previous soft market, and with better technology and all lines of business employing actuaries, data is analyzed faster.

Because of this, Mr. DeSimone said companies will be able to pick up on the deterioration in their books faster “and will take action sooner rather than linger in highly unprofitable circumstances until they realize it's too late.”

The Willis report explains in its “Future Outlook” that “we titled this review 'Defying Gravity' because it seemed to sum up the strange current situation in which it is hard to find any corner of the market where rates are not softening and profitability is under severe threat yet there is no sign of capital capacity withdrawal.”

The report added, “The only logical conclusion must be that competition will continue to increase, and eventually fingers will get burned; some badly.”