... the property and casualty industry is suffering a double whammy. Caught in a soft market where pricing is low and competition remains fierce, the industry certainly didn’t need a worldwide financial crisis to boot. As a result, trying to get industry solons to speculate as to when today’s soft market will turn is like eating soup with a fork.
Dan Webb, president of Security Risk Managers, a wholesale broker specializing in hard-to-place construction risks, says that one of the problems he sees in today’s contractors market is that standard carriers are moving into the surpluss lines business. “They’re looking to shore up premiums that they’re losing in the standard market by going after tough contractors, but they’re doing it by going back to cash flow underwriting.” says Webb. “The standard markets are short on experience when it comes to underwriting this class of business. Don’t forget, we write the hard-to-place risks, the tough risks that the standard market wouldn’t even consider a year ago. Now they’re chasing the business with ridiculously low pricing. We had a tough contractor who was paying an annual GL premium of $200,000. These carriers came in and undercut to the point where he is now paying $84,000. They will realize they’ve made a mistake when the claims start coming in.”
Below is an excerpt from the ROUGH NOTES article:
