CHICAGO-Property insurance market conditions will remain tough for buyers this year, while casualty markets will prove much more manageable, predicts Marsh USA Inc.

The roots of the current state of the insurance market reach beyond the Sept. 11 attacks and the Enron Corp. collapse, Arlene Corsetti, managing director and head of the Chicago office of Marsh USA, said in an April 9 presentation of Marsh's 2002 Insurance Market Review & Forecast.

Years of rising industry losses, the growing dollar value of risks, the concentration and inadequate spread of risk, and a downturn in insurers' investment income all have contributed to the current market environment, Ms. Corsetti said. Insurers have responded by tightening underwriting, raising rates and reducing capacity.

Sept. 11 and Enron exacerbated the problems, Ms. Corsetti said, with Enron presenting a new set of concerns.

"Enron is something different," she said. "The biggest issue right now that Enron presents for the industry is a questioning of all the information underwriters get. It makes them question the whole basis underlying how they assess risk."

On the property front, Marsh forecasts that insurance buyers looking to renew coverages this year can expect to see a continuing trend of significantly higher premiums and reduced capacity.

Manuel Ribot, a senior vp and Midwest property manager for Marsh in Chicago, said that "in today's environment, you probably aren't going to get limits in excess of $500 million (for) all-risk property coverage." Meanwhile, rate increases of 100% to 300% "are not unusual," he said.

And, as the market grapples with terrorism coverage issues, "there will be and there probably are gaps in your coverage with respect to terrorism, and you've got to be aware of that," Mr. Ribot said.

While there is capacity coming into the property market, "the market is still volatile," the Marsh broker said. "Underwriters are still trying to figure out what they can do and can't do."

In the casualty market, "the good news is, I think the market is much more manageable than the property market," said Kevin Brogan, a senior vp and casualty manager with Marsh in Chicago.

"Workers compensation, in my opinion, is a pretty manageable line of coverage," he said.

Although workers comp rate increases this year are in the 20% to 50% range, "hopefully 90% of that book is down at 20%," he said, adding, "that number should be going down through '02 into '03."

For large national accounts, 2003 renewals "should be pretty flat," Mr. Brogan said.

Marsh is seeing general liability rates increasing 15% to 30% this year, up from increases of 7% to 12% last year, Mr. Brogan said, while commercial auto prices are increasing 20% to 40% this year, up from increases of 10% to 15% last year.

The excess casualty market is "firm to hard," Mr. Brogan said, with increases of 65% to 85% this year and a wide variation of rate hikes based on the class of business.

In the directors and officers liability insurance market, rate increases of 30% are the norm for "plain vanilla" exposures, said David S. Nikolai, a senior vp at Marsh and financial and professional insurance product practice leader in Chicago. But, "If you're talking about high-tech, the premiums are going up anywhere from 50% to 300%," he said.

Employment practices liability rates were up 20% to 40% at Jan. 1 renewals, Mr. Nikolai said, largely as a result of the severity of court awards.

In surety lines, the Enron debacle "has removed quite a bit of capacity from the marketplace," Mr. Nikolai said. Buyers might now have to go to five or six markets to assemble capacity they could previously obtain from one, he said, and they should expect underwriters to demand collateral.

In the environmental liability market, although Sept. 11 did not have a direct impact on the market, the resultant tightening of the reinsurance market is having an indirect impact on that market, with rates rising 5% to 10%, according to Michael McGinn, a senior vp and Marsh Midwest environmental practice leader. Still, "the market's healthy," he said, with numerous players.