He added that, not only have new companies come into the market, but existing companies have expanded their current writings.

"There are a number of markets that have doubled or tripled their capacity this year just to take a larger share of the exposure--a larger share of the risk," said Mr. Girden. "So we've seen a significant change in the standard markets."

One change that separates 2007 from other recent years is the softening in catastrophe areas at risk for hurricanes, "which, up until about three months ago, had maintained a fairly hard approach," according to Mr. Girden.

Similar to the coastal homeowners market, the industry began to reevaluate its exposure for construction risks after Hurricane Katrina and the other major storms of 2004 and 2005.

But unlike the homeowners market, capital is returning after two quiet hurricane seasons. "In the last month, there's over $500 million in new capacity coming into the marketplace," said Mr. Girden.

The same phenomenon is being seen in builders risk for inland marine exposures, according to Bill Muir, marine vice president and national inland marine director at RLI. He said that Florida and the Gulf Coast are still the toughest areas to write business. But, like Mr. Girden, he said the market there is softening as well.

"Anytime you have two or three years where [hurricanes] hit, that means the market's really going to harden there, but it's amazing how, already, just two light hurricane seasons have made it so that a lot of companies are back writing risks along the coast," said Mr. Muir.

However, it's still not exactly a buyers' market in storm-prone areas, according to Mr. Muir, who noted that wind and flood deductibles--particularly in catastrophe regions--have generally gone up.

In explaining insurers' decisions to re-enter the market along the coast, Mr. Muir said carriers have short memories, and they're willing to take a chance.

Differentiating the inland marine builders risk market from the homeowners market, where insurers have demonstrated a continued reluctance to take on new exposure, Mr. Muir said that with builders risk, there are different carriers, for the most part. "You really have an entirely different set of markets," he explained. "I think [homeowners carriers] are the ones who bore more of the brunt of Katrina--as a percentage of the insured losses, anyway."

Mr. Girden offered his own take. "I think what it is--especially in the construction area, coming through the last set of hurricanes--[is that] when insurers look back on the historical cycle for losses within the construction industry, they realized that, over the last couple of decades, the combined ratios were in mid- to high-80s, which is probably one of the most outstanding classes of business within the insurance industry," he said.

He added that "what happened, probably early first quarter, after the results started coming out, a lot of senior company executives started focusing their attention on areas where they could capitalize on larger profitability, and construction was one of them."

Todd Rowland, senior vice president for construction specialty products and services at Zurich North America Commercial, said insurers can engineer coverages more easily with builders risk than they can with liability lines.

For example, he said insurers can look at the period of construction, and if a project has a short time frame, it will not be impacted too much by the hurricane season. "So there are things you can look at more specifically on a risk-to-risk basis" in builders risk, Mr. Rowland explained.

On the coastal builders risk market overall, Mr. Rowland agreed with Mr. Girden that there is plenty of capacity, but he said pricing in those areas is still expensive. "The biggest thing that's affecting both insurability and capacity are in those coastal states where flood and wind are a big problem," he said.

The condition of the builders risk market also varies with respect to commercial risks and residential risks. Much of the competition and capacity is on the commercial side, according to Mr. Girden.

"We are seeing rates right now that are getting close to 1999-2000, where the rates were at historic lows," he said, but he noted that rates are not at those levels yet.

Mr. Girden's biggest concern in the commercial market is that some of the new capacity coming in might not truly understand the risks and might try to underwrite construction the way they write other unrelated markets.

"And that's ultimately what ends up happening," he said. "They'll do fairly well at certain classes of business, but because they want more, and they're being pressed for more, they'll expand their base to assuming other risks and other exposures, and ultimately that's where they fail."

He added, "That's the one thing that's continued to plague the industry."

On the residential side, Mr. Girden said insurers have backed off of risks in part because of the problems associated with the housing market in general. He said the insurance industry has typically avoided liability risks associated with the residential market because of the construction-defect issues, but now carriers are backing off of builders risk as well.

Specifically, Mr. Girden said the financial collapse of many lenders, as well as projects that are considered overpriced prior to them even starting, have given insurers cause for concern.

"A lot of insurers are backing off of that because they are very concerned with insuring something that is not going to sell, and then [it] becomes a financial liability for the insurer in the event that, three quarters of the way through, the client decides that he can't sell it and abandons the project, and then there's some pressure on the insurers to stay on the exposure."

Mr. Girden added that, on the residential side, there is a lot of inventory--much of it vacant and deserted. "One insurer told me yesterday that the top person at this very large E&S company will not allow any of their underwriters to write any homebuilders unless the executive vice president of this company personally reviews and signs off on the financial statements. And that is just unheard of. But that's how concerned the companies have gotten."

However, John Mentz, executive vice president of construction for Arch Insurance, said he does not believe the slumping housing market has greatly affected the insurance industry. "Honestly, I'd say it has little impact," he said.

Mr. Mentz added, "I haven't seen that be a big driver of insurance market terms and conditions. I think the insurance market terms and conditions are driven by the insurance market cycle, not exactly the economic cycle."

He did, however, note the effect of the market on contractors. "There's much less residential work out there, and the impact on those contractors has been significant."

In a softer builders risk market, as in any other insurance market, there is a risk that consumers will be drawn toward lower prices without considering the impact on service and solvency. Mr. Girden said that with builders risk, consumer opinions on price versus service vary.

"When you're dealing with the contractor side of the page," he said, "they are looking to be there for a long period of time, so our advice is to look at companies that have a proven track record of being in the business and [are] moving forward in their commitment to the business...[Contractors] want stability."

Developers, Mr. Girden said, look at coverage from a different perspective.

"Developers, that's a different story," he noted. "A lot of firms that are involved in the development of a risk or certain classes like that, they will look for the lowest price available, because ultimately, at the end of the day, when they build that building and sell it, every nickel they save on the front end could be profit on the back end."

Mr. Rowland said the idea of a sophisticated buyer is very much a reality in the business that Zurich writes. He said Zurich's book on the commercial side is high-end and selective. "We're very conscious of the risk selection."

In addition to price, such customers place high value on extra services, including the ability of an insurer to handle claims and deliver risk-engineering services, according to Mr. Rowland.

"A lot of our customers aren't selecting the lowest-cost insurance. They're selecting the best-value insurance," he said.

He noted that this level of sophistication among buyers is a recent phenomenon, and was not present in the last soft market.

Mr. Girden expects the market to continue softening through this year, although he conceded that a couple of catastrophic events would cause insurers to slam on the brakes and head back toward a hard market.

In particular, he said a terrorist attack would have a considerable financial impact on all insurers across many lines. "That would have a big effect on the industry," he said.