Soft Market Resolutions
The excess and surplus lines market waved goodbye to the hard market some time ago, but warn standard market companies about their underwriting and pricing practices.
When the excess and surplus lines market declares the market soft, it's official. However, when E&S brokers say they see evidence of lax underwriting and potential underpricing, it's cause for concern.
Wasn't this soft market going to be different and disciplined? Weren't insurers going to remember the fact that today's investment environment won't mask underwriting losses? Alas, it seems the insurance industry has taken on the role of the cheating spouse, the one who swears if he/she gets another shot, he'll/she'll never do it again. Then an appealing risk or some tantalizing bit of market share happens by and all promises go out the window.
I guess you can't blame insurers entirely. With one hard spot in an otherwise soft market (catastrophe-exposed property), they are going to be looking to be aggressive in other lines of insurance. Of course, if every company going sallying happily into the directors and officer liability market and it goes through another rough patch of Enron-WorldCom-Tyco-whatever lawsuits, that strategy looks slightly less sensible.
However, over in the E&S market, brokers are settling in for a soft market, when they look to safeguard relationships with agents. The relationship works both ways - once the market turns again as it indubitably will, the connections to the surplus lines market will prove invaluable for agents in tougher times.