The soft market deepened last month for the property and casualty insurance industry, particularly for bigger buyers, with the overall composite rate declining 5 percent, compared with 4 percent in January, MarketScout reported.

MarketScout Chief Executive Officer Richard Kerr said rate reductions have held to a pattern over the last six months, declining by either 4- or 5 percent during that span. “There will always be some changes month to month,” he said, “but generally we are seeing a consistent pattern of pricing in most coverage classes.”

MarketScout said commercial property, general liability and workers' compensation policies have declined the most–5 percent–while business interruption, directors and officers liability, employment practices liability, fiduciary liability, and crime coverage have seen the most modest decreases at just 1 percent.

The lone exception has been coastal property, which has seen a firming in rates due to catastrophe exposures, the Dallas-based electronic insurance exchange found.

“While property rates were down 5 percent on a national basis, rates for wind capacity in the Gulf Coast, Florida and the East Coast–up to and including North Carolina–are moderating or increasing,” said Mr. Kerr.

“Admitted insurance companies in some coastal states are restricted from raising rates beyond a certain point,” he noted. “Some of these insurers feel they are unable to achieve a reasonable premium and are choosing to reduce their exposure because they cannot achieve rate adequacy. In addition, several large, nonadmitted insurers who traditionally offer coastal property capacity are simply choosing to sit on the sideline as they wait for rates to increase.”

He added that while there are rumors that two new entrants will enter the coastal property market before July 2010, prices will not likely fall as a result because the insurers are entering at a time when they hope to catch rates on the upswing.

“It's a pretty good bet coastal property rates are going to increase soon,” according to Mr. Kerr.

Meanwhile, not all insurance buyers are created equal. Indeed, rates for large accounts (defined as having premium between $250,000 and $1 million) declined 7 percent, according to MarketScout, which reflects the competitive nature of this market segment, driven by the large number of insurers that target accounts of that size and the sharp decrease in the number of exposures, the firm explained.

“As exposures decrease, so does premium,” said MarketScout, which puts out the monthly “Barometer” survey. “In order to hit budget projections, some insurers are choosing to get more competitive on new business opportunities with accounts they feel are well managed and in a desired business class.”

It's a different story for rates for small accounts (with premiums up to $25,000), which declined the least at 3 percent, according to MarketScout, while medium ($25,000-$250,000) and jumbo accounts (over $1 million) both declined 5 percent.

By industry class, rates declined the most for manufacturing, contracting and service–all down 5 percent. Transportation saw the most modest decrease, at 2 percent.

Rounding out the industries monitored by MarketScout, energy and habitational risks both declined 3 percent, while public entity risks declined by 4 percent.

The National Alliance for Insurance Education and Research conducted pricing surveys used in MarketScout's analysis of market conditions. “These surveys help to further corroborate MarketScout's actual findings, which are mathematically driven by actual new and renewal placements across the United States,” the firm said.

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