The market for errors and omissions coverage remains soft in most sectors even though high-risk areas such as financial services have seen sizable rate increases, observers say.

Brokers, underwriters and risk managers say plentiful capacity has allowed buyers in many sectors to find average rate decreases in the low single digits even as many underwriters say price increases are needed.

``Especially when you're a large account like we are, we're just not having trouble filling out (our) programs,'' said David Conca, New York-based director of risk management at media conglomerate Time Warner Inc. ``Even if you're getting some push-back on the primary level, you can still secure cost savings on an excess basis because those layers can just be put into competition.''

In the technology sector, the average account is seeing a rate decrease of 1% to 5%, said Sandy Codding, New York-based managing director and co-leader of the professional liability practice at Marsh Inc.

One exception is firms involved in data processing or outsourced processing, said Jed Shea, a Kansas City, Mo.-based senior vp at Lockton Cos. L.L.C. The January revelation that intruders last year hacked into the computer system of Princeton, N.J.-based Heartland Payment Systems Inc., which processes 100 million credit and debit card transactions a month, provoked firming rates and tightening coverage of those risks, Mr. Shea said.

Miscellaneous professional risks and large law firms also have seen average rate decreases of 1% to 5%, while small law firms have seen decreases in the range of 20% to 25%, Ms. Codding said. Smaller firms purchase lower limits and fill fewer layers, which exacerbates the supply-demand imbalance caused by increased capacity, she said.


Ms. Codding estimated E&O market capacity has increased by around $50 million in the past two years and other observers confirm pricing has been influenced by new players entering the market or existing insurers expanding the sectors in which they write business.

Up to $400 million in capacity is available for individual accounts and E&O capacity could be as high as $700 million, depending on the industry sector, Ms. Codding said.

Experts say the new players may be driven by a desire to diversify their underwriting portfolio or attracted by the long-tail nature of most E&O claims.

``The time between taking the premium in and actually paying out on the claim, relative to other classes, is a pretty lengthy period of time,'' said Bruce Eisler, a New York-based senior vp at Liberty International Underwriters. ``These facilities can come in for the first two to three years, collect a significant amount of premium'' and likely do not have to pay substantial claims.

In real estate, buyers have seen relatively soft pricing, excluding a couple of problematic areas, observers say. Appraisers have seen a fairly significant rate increase in the past year, Mr. Eisler said. Exposures involving title agents and real estate agents have seen increases as high as 40% to 50%, said Phil Norton, the Chicago-based managing director of Arthur J. Gallagher & Co.'s management liability practice.