will bottom and rebound but our people are reporting a continued competitive pressure, much to our disappointment. You know, as sort of an old head in this industry, I’m asked occasionally to speak to young insurance majors and people early in the industry and my stock line is “I’ve got some good news and some bad news for you – the bad news is that you’ve chosen to enter probably one of the most poorly managed industries in the entire worldwide economy. The good news is that you’ve chosen to enter probably one of the most poorly managed segments in the worldwide economy.” Three or four or five years ago I really thought for the first time in my career that the management in our P&C worldwide sector was starting to ‘get it,’ understood the needs for underwriting property ROEs were going to be anything reasonable, but the last two or three years – as this still continues – have proven to be very, very disappointing to me. I think three or four years of straight reduction in pricing and I agree with Dan. The surplus lines industry has always been more responsible than the overall P&C market, but we have not been impervious to reduced margins and we’ve given up ground grudgingly. I think E.G. would agree with this, but I’m not very proud of our existing price levels. Clearly, we think they’re profitable, but not necessarily producing the types of underwriting results that we’re used to and the AIG situation you would think, coupled with Ike and frankly the erosion of capital that is yet to be reported and it would create a backdrop of pricing increases – certainly stability. But we’re not seeing it. Ultimately it will come, but right now I’m very disappointed in the pricing levels.

McDONALD: Where are we right now on the spectrum of hard and soft pricing?

MARKEL: Pretty soft. Very soft.

McDONALD: The other thing we hear is that it went from a hard market to a soft market faster than it’s ever done. Is that pretty much true?

MARKEL: I don’t know. I’ve been around a lot of these cycles. I’m not sure it’s a whole lot different. It came gradually and then picked up speed, but it just continues. You know it doesn’t take a rocket scientist to figure out that if you look at the rate erosion and – Dan alluded to a little bit of this – over the last three of four years that there was not that much cushion where that type of rate can be given away and still produce the type of results that we as an industry ought to be receiving. Very, very disappointing.

McDONALD: Chris, you come from a different perspective, the wholesale side, the brokers’ side, you might even see a little more broadly than Tony – you’re out there shopping every day. What are you seeing?
TREANOR: I would say in general. I agree with Tony. I would say that we are seeing – not price increases but we are seeing some stabilization in the areas you’d expect, the areas that have been hit hardest. Cat property, I think you’re seeing more of a level pricing, certainly not the decreases we were seeing earlier in the year. I would say in the D&O, particularly the FID&O E&O, you’re actually seeing price increases. But I think to a point everyone’s taking a wait and see. Everybody’s talking about the hard market. I was in Bermuda last week and talked to every property underwriting company on the island and they all said hard market’s coming, hard market’s coming, but it’s wait for the one/one treaties and we’re keeping our powder dry. So, what we’re seeing is that the cat players are pulling back a little bit because they think there’s going to be a better rate environment in Q1 of ’09. You know most people look back to the last events and it takes a while for it to wash through the system. If you look at Katrina, prices didn’t really kick up hard until 1st quarter of the following year, 2006. So, there certainly is a little bit of a lag and I think people are anticipating that. What’s going to be interesting is people have capital, they still have capacity, so if everyone is pulling back a little bit waiting for that hard market and then they all pile in in the first quarter, and will the hard market actually come? I do think that Tony’s point
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