A study released by A.M. Best has confirmed that the nonstandard automobile insurance sector is cyclical in nature, characterized by periods of severe price competition and excess capacity followed by periods of high premium rates and shortages of underwriting capacity. In the late 1990s, many nonstandard auto insurers attempted to capture business by reducing rates. These industry-wide rate reductions, combined with increased severity trends, contributed to the deterioration of industry loss ratios in the years 1999 through 2001. Since that time, most nonstandard auto carriers raised rates and tightened underwriting standards to address poor results. Some insurance companies withdrew from the market because of their inability to compete successfully, impaired capital positions, or because of a decrease in the availability of reinsurance. However, the nonstandard auto sector has rebounded considerably over the past few years. Evidence of this can be found in Wall Street’s confidence and several successful IPOs. But as the industry continues to fall down toward the trough of the pricing cycle, the combination of a flattening rate environment and expanding capital levels brings to light concerns about when competition will emerge wholeheartedly within the industry.