Market turmoil ‘exacerbating’ rate erosion in specialty p&c lines

Pricing in the property and casualty commercial specialty lines continues to soften in spite of damages wrought by Hurricane Ike and recent market turmoil, attendees of an A.M. Best Webinar heard.
Anthony Markel, vice chairman of the Markel Insurance Group, sat on the panel of speakers participating in the Webinar, ‘Insurance Producers and Today’s Specialty Insurance Market.’
He spoke of his disappointment with the industry’s inability to rein in its current rate decreases. “Logic would tell you that prices will bottom out and rebound,” he said. “But our people are reporting continued competitive pressure, much to our disappointment.
“The AIG situation, coupled with Ike and, frankly, the erosion of capital that has yet to be reported, creates a backdrop [for] pricing increases certainly stability but we’re not seeing it.”
Markel commented that AIG’s recent financial woes have served to exacerbate the situation. AIG was the largest writer of specialty lines in the United States in 2007.
“You would think that the wounding of the 800-pound gorilla in all of the specialty markets would signal more movement of rate back-up and the stopping of rate erosion,” he commented. “But in fact and I think that this is a short-term problem the AIG problems have exacerbated the rate fall, because they are even more aggressive now than they have been over the past three or four years.
“They are dramatically eroding what is already very questionable pricing in order to make sure that business does not walk out the door.”