Insurance rates continued to fall across most lines of business as companies competed vigorously for business according to a wide-reaching industry survey.

The Risk and Insurance Management Society (RIMS) Benchmark Survey showed the soft market continued despite the erosion of the industry's capital base last year.

Widespread investment losses during the market turbulence of last year reduced the supply of insurance capacity — something that normally leads to a rise in rates.

But with the slowdown in economic activity and with corporations ordering their risk managers to tighten the purse strings, the soft market has been extended.

The RIMS survey, based on information on policy renewals gathered by industry analysts Advisen Ltd. from North American risk managers, showed general liability and workers' compensation policies both posted average decreases in renewal premiums.

Directors' and officers' liability (D&O) policies renewed at higher premiums on average, but the increase was due to financial sector companies, a segment that has been bloodied by the sub-prime mortgage meltdown and credit crisis. Property policies renewed at essentially no change.

Workers' compensation recorded a 2.8 percent average decrease in renewal premiums, as compared to a 1.7 percent drop in the second quarter of 2008, and general liability posted a 1.1 percent drop as compared to nearly a five percent decline a year ago.

D&O increased 2.9 percent, a reversal of the 6.4 percent average decrease in the second quarter of 2008. However, excluding financial services companies, D&O policies renewed with a 4.1 percent average decrease.

Property premiums fell less than one percent, which compares to a 6.1 percent drop in the second quarter of 2008. Rates continue to drift downward despite the loss of $81 billion in policyholders' surplus — a measure of insurance capacity — in 2008 and the first quarter of 2009, according to the Insurance Information Institute.

"Insurance capacity is disappearing at a startling rate, but the market nonetheless remains competitive," said Dave Bradford, executive vice president of Advisen Ltd. and editor-in-chief of RIMS Benchmark Survey.

"As a result of the recession, the demand for insurance capacity also has decreased, which has kept pressure on rates. Companies are downsizing, which means that there is simply less to insure."