Although most observers consider the CPA professional liability insurance market to be moving toward a "soft" model, one company has dropped out of the market altogether, while another company has just entered."We're not writing any new business," said Mike Phillips, miscellaneous professional liability product manager for Chubb Specialty Insurance.

"Compared to several years ago, it is a soft market," said Bill Thompson, of Alachua, Fla.-based CPA Mutual Insurance Co. "A lot more companies are back in the market than a couple of years ago. It's always surprising to me, because you would think the companies would learn. When you think about it, if you sell a product that cost $10,000 in 1990 and you sell it for $6,000 or $7,000 in 2006, does that make sense? Especially when you consider that legal fees and awards and the expense of settling claims has increased."

"But if you're hungry enough for business you might take a chance with the premium," he added.

Gregory Leffard, vice president of professional liability at The Hartford, is less convinced. "I'm not sure I would classify the market as soft," he said. "We're targeting a specific size firm - the very small firm. Chubb wrote insurance for mid- to-large-sized firms. The small firm market is competitive, though not necessarily soft."

Camico's vice president for risk management, Ric Rosario, agreed. "It's worth saying that the market has calmed down and is not a hard market, but it's not necessarily a soft market either," he explained. "Several years ago it was clearly a classic hard market, with carriers departing and prices rising. This was because of the 2001 and 2002 claim years, which had a historical spike in claims."

"The good news is that 2003 and 2004 were pretty good claims years," he observed.

"The claims spike stabilized, carriers didn't feel the pressure to raise rates, and new carriers came back to the market place," he said. "In a classic soft market, too many people are in and they do pricing based on trying to get market share. It ultimately produces a negative spiral, but my view is that the market is in balance now, and that's a good place to be."

Mike Warshany, at West Orange, N.J.-based Jamison Insurance Group, also noted that the market is becoming more competitive. "Now is the time to send out questionnaires to other carriers and see what's out there," he said. "It's possible to save $500 to $1,500 on your coverage by comparison shopping."

Although Sarbanes-Oxley's requirements can potentially affect a firm's liability, it remains to be seen how much it will impact overall liability exposure, say observers.

"There's a lot more [SOX Section] 404 work, but the jury is still out on how much risk is involved," said CPA Mutual's Thomson. "But to be honest, we'd almost rather insure 404 work than attest services."

"In the size firms we're talking to, SOX is not much of a factor," said The Hartford's Leffard. "Our underwriting appetite doesn't include looking for firms that provide services to publicly traded companies."

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