Still, the soft market is far from over, Mr. Watson suggested. "There's so much capital, and therefore capacity in our industry today that a $50 billion loss that was fairly catastrophic only a few years ago really doesn't change much today," he said.

Insurers are also much better at managing and pricing their risks, with better tools and data available than a few years ago. "But then there's this thing called the market. The market price is the market price," he said, predicting there will be little difference between this cycle and past ones.

"Until a large amount of capital comes out of the marketplace for one reason or another, prices are going to continue a precipitous decline for another couple of years," Mr. Watson predicted.

Separately, during an interview at the NAPSLO conference, Alan Kaufman, CEO of Burns & Wilcox--a Farmington Hills, Mich.-based wholesaler and MGA--also predicted that as the market changes, the attitudes of these financial buyers will change with it.

Right now, "it's still a sellers' market. There's still a big demand, but the demand has decreased," he said. "The longer the forecast is for this softening market, as the performance of competitors declines, demand will decrease also."

From a wholesale broker's perspective, Mr. Kaufman said, "Our attitude will be this is a great time to make acquisitions."

"We're very long-term players, and when we make an acquisition, we're looking at the forecast down the road for many years, not in the short term," he said. "The investments we make sometimes don't pay dividends for many years, but when they do, they pay handsomely."

Gerard Vecchio, a managing director with Century Capital Management, a Boston-based PE firm, said he anticipates the current stage of the insurance cycle will mean more investments in insurance distribution and service companies than in insurance carriers for his firm's 2007 fund--a fund raised last year, which has an investment period that runs through 2012.

In contrast, an earlier 2002 fund had 65 percent of its investments in underwriting companies and 35 percent in distributors, Mr. Vecchio reported.

Later, he highlighted a 2007 investment his firm made in Thomco Insurance, a program manager in Kennesaw, Ga. With 17 programs including ambulance drivers, tanning salons and inflatable backyard games for children's parties, "we felt they were very well positioned even in a market where you see premiums [and] commission income drop because of their specialty nature."

In addition, when the industry emerges from the market trough, "they will be especially well positioned to take advantage of the ultimate upturn," he said.

"Since we invest only in insurance, we have to invest through good [hard] markets and soft markets," Mr. Vecchio said, explaining that a longer-term view is necessary in the current market environment, and that the focus is on specialty companies during a soft market.

John Kraska, managing director for Hales & Company in New York, a deal adviser, said his firm is seeing more insurance companies interested in wholesale broker and MGA business because "it gets them a little bit closer to the customer [and] a little bit more in control of the premiums."

Mr. Kelty said he expects very large wholesalers to continue to seek to acquire smaller ones, a phenomenon that will be less prevalent on the retail side, where business models are more homogenous.

At Burns & Wilcox, Mr. Kaufman said, "if the right opportunity presents itself, we'll make some acquisitions," noting that his firm has seven or eight acquisitions on the table right now, and a couple on which it is doing due diligence.

While Mr. Kaufman said he's seen no decline in the quality of acquisition candidates, looking ahead, "we'll do some acquisitions that will come because of unfortunate [economic] circumstances" that force sales.

"There will be some situations where institutions have purchased some of our competitors and the returns aren't there, so they can't justify their existence on a short-term basis. Consequently, they'll unload the company they purchased, which will be too bad in some cases," he said, noting that when pieces are split up, they may lose the "total true value."

Mr. Kaufman also reported that his firm has been able to acquire talent, because "the people are quicker to respond individually than the companies themselves."

"They see the market going [and] they see their companies [being put] probably on the block in the short term. They don't want to be with a company that's going to be sold," he said. "They want to be with a company that's growing and going to be around for many years."

For more on making deals with private equity, see related articles in this edition:

"Private Equity Deals No Automatic Exit For Sellers Of Wholesale Brokerages"

"What Is Private Equity?"

Coming in April's E&S Extra:

"Getting Down To Basics: Advisers Needed For Broker M&A"