MarketScout promulgates a composite Property and Casualty rate on a monthly basis for US insurance placements. Rates are calculated in the aggregate, and for each individual coverage class and industry group. MarketScout also computes rates for insurance placements as determined solely by the size of total premium for each account. MarketScout's computations are promulgated from raw data and further supported by hundreds of in-person surveys conducted by The National Alliance for Insurance Education and Research.

The composite rate for May 2009 is minus 6% as compared to minus 7% in April 2009 and minus 11% in May 2008.

Richard Kerr, CEO of MarketScout summed up the April rate by stating, "Every sensible economic indicator tells us rates should be increasing, yet there are still three large, admitted, publicly traded insurers clamoring for premium, seemingly at any rate and continuing to prolong the soft market. Historically, the end of the soft market is punctuated with last gasp deep rate reductions by a few desperate insurers, signaling either the end of the soft market or the end of an irresponsible insurer. Either way, once these irresponsible underwriters are reined in we should be on the way to rate increases.

Until that occurs, the soft market will continue. We project the turn will come by year-end because all but the terrible trio are making appropriate underwriting decisions. Even the E&am;S market is refusing to chase rates down, sitting on the sideline as the terrible trio slash each other to bits. Our guess is prudent insurers are waiting to pick up the fallout when the terrible trio have their day of reckoning.

To protect their investors, stock analysts need to go well beyond reviewing published financial data and ask more probing questions during investor conference calls. One simply cannot fully analyze an insurance company without reviewing actual underwriting and pricing practices. Seldom are questions asked about real life situations such as, 'Why did you write Joe's Plumbing for 50% of what your four competitors quoted? Are your underwriters on a production incentive based on growth or underwriting profit? What are the results of your internal underwriting audits for each line of business? Do you reprimand or remove underwriters who fail their audit? And what is your particular secret to growth during this period of economic decline and declining rates?'

Of course, asking questions without hard evidence of the irresponsible underwriting conduct may not have much impact. However, the brokers know where the soft under belly of the market lies. Stock analysts should talk to brokers to determine which insurer has the hottest hand. You may not get much information from some brokers, lest they lose their money tree. However, there are plenty of real life case examples if you simply do the research. As for the irresponsible premium quotes, you cannot blame the brokers; it's their job to get their insured the best deal. In the end, the poor management of the insurer will create the most pain for the Mom and Pop shareholders who are investing in household names. In our new financial world, the CEOs of the terrible trio are ultimately going to have some explaining to do."

A summary of rates for each coverage and industry class as well as by account size is available for each month at www.marketscout.com.
For May 2009, the rates were as follows:

By Coverage Class

Commercial Property

Down 5%

Business Interruption

Down 5%

BOP

Down 6%

Inland Marine

Down 5%

General Liability

Down 6%

Umbrella/Excess

Down 6%

Commercial Auto

Down 4%

Workers' Compensation

Down 7%

Professional Liability

Down 5%

D&O Liability

Down 4%

EPLI

Down 4%

Fiduciary

Down 3%

Crime

Down 5%

Surety

Down 5%

By Account Size

Small Accounts

Down 6%

Up to $25,000

Medium Accounts

Down 6%

$25,001 - $250,000

Large Accounts

Down 7%

$250,000 - $1,000,000

Jumbo Accounts

Down 8%

Over $1,000,000

By Industry Class

Manufacturing

Down 7%

Contracting

Down 6%

Service

Down 8%

Habitational

Down 6%

Public Entity

Down 5%

Transportation

Down 5%

Energy

Down 6%