Several years of manageable losses, combined with premiums earned during the construction boom at the start of the decade, allowed insurers to build their reserves and cut rates, said Michael Feigin, global construction practice leader for Marsh USA Inc. in New York.

"The market is still soft and there's not a lot of pressure right now for rates to go up," Mr. Feigin said.

Some experts, however, do not expect the soft market to last as the economic slowdown squeezes insurers' finances and the construction slowdown lowers premium volume.

"The margins are thinner after years of decline and insurers' returns on investments are falling," said Don Pickens, executive vp and chief underwriting officer with Liberty Mutual Group in Boston.

"The third-quarter cat losses from Hurricanes Ike and Gustav are hitting a bit harder than people thought, and then you have the impact of three or four years of rate erosion. Carriers are going to be looking to stabilize pricing and then push it up because we need to generate a fairly good return on equity," he said.

"Rates have been going down for three or four years, but now we're going to see rates flattening for good, financially strong contractors, and they'll probably go up for the others," Mr. Pickens said.

"We expect, within the first quarter of 2009, to see a number of insurance carriers show worse results than they have in the last few years, just because they can no longer rely on investment returns to back up their portfolio," said Paul Jansen, chairman of the London-based broker Jansen & Hastings Intermediaries Ltd. "As far as 2008 is concerned, the number of competitors has led to some softening, with markets trying to fight for the business that is out there."

Some experts say competition might take the edge off of any market hardening in the short-term, particularly as premium revenue thins.

"Carriers who were in the project wrap-up business before got out, but are now getting back in," Mr. Feigin said. "Parts of the business expect bigger losses because of hurricanes and other losses, but the good news for the construction industry is that there are more players."

Despite the economic pressures, they're "not enough to overcome the competition in the marketplace, and not enough to overcome simple supply-side economics," Mr. Feigin said.

Some, however, expect construction-related insurance pricing to firm or rise.

"I believe we will see a shift to a hardening market, but it's too early to tell right now when that's going to come to fruition," said Paul Primavera, Washington-based senior vp-claims with Lockton Construction Services Group, a unit of Lockton Cos. L.L.C.

Diminishing insurance margins likely will lead to tighter underwriting guidelines, said Paul Becker, Nashville, Tenn.-based president of the Willis HRH construction practice.

"We do expect underwriters to get much more diligent about how requirements are met and take a closer look at (potential risks posed by) subcontractors," Mr. Becker said. "That might cause insurance costs to grow."

The breadth of coverage available, however, shows few signs of narrowing in the near future, some say.

"Currently, carriers want to keep or stabilize the premium base they have, so that tells me that those terms and conditions will either stabilize or broaden vs. retract," said Lockton's Mr. Primavera. "We still see a lot of long-tail coverages that were probably placed three years ago, and those are going to have an impact as well. Carriers will take a look at those and make a decision."

Rates also likely will be softer for contractors who have an established history with their insurers, said Sal Perrucci, executive vp and managing director of Aon Construction Services Group in Chicago. "What the underwriters are looking to do is establish long-term relationships," Mr. Perrucci said. "The cost of new business is pretty significant, and they would like to lock in an arrangement on a multi-year basis."

The increasingly competitive environment for builders also may bring new risks, which could lead to increased losses.

"Some overhead cost cuts are getting close to the bone, like risk management and safety management," Mr. Becker said. "In the effort to get overhead down, we're afraid that some contractors might be tempted to cut into those necessary things."

There also may be pressure, as construction projects become scarce and bidding among contractors gets more competitive, for contractors to take on projects they normally would not.

"You could see some overreaching-we've seen some of that from residential builders going to general building," said Liberty Mutual's Mr. Pickens. "Some can make that transition well, but from an underwriting perspective, we'll want to make sure the contractor has the experience to do the job they're taking."

Experts warn that, while business pressures might tempt contractors to take jobs with thin profit margins or outside their normal areas of expertise, caution is in order.

"Clearly, we've seen contractors getting into marketplaces that they haven't done before," Mr. Primavera said. "That may include contractors going into new territories or partnering with new subs, and that needs a lot of preparation to be successful.

"Clearly, that's something that you have to be looking at from a risk management perspective," Mr. Primavera said. "You have to be careful about making sure you have adequate coverage. There may be contractors who were not doing residential work, for example, that may have residential exclusions in their policies."

Another potential source of instability in the construction market this year was the government bailout of American International Group Inc., which covers many of the biggest construction firms. Brokers say that, while clients have looked for reassurance and made sure they had alternatives to AIG, there has been almost no movement of business away from AIG.

"We're retaining about 95% of our renewals since everything broke," said Daniel Conway, president of AIG Construction Risk Management in New York.

"I would describe that currently as a stabilized situation," Mr. Primavera, of Lockton, said. "We've looked at them from a financial standpoint, and we offer our individual clients options.

"They are currently trying to remain in the market, and that's an interesting development," Mr. Primavera said. "We haven't seen any exodus or loss of premium-that's actually stabilizing the market."