NEW YORK (Bloomberg) — The insurance industry has underpriced its policies, with "cowboys" setting unreasonable rates for coverage, Ace Ltd. chief executive officer Evan Greenberg said.

Ace's third-quarter premium revenue fell six percent to $3.39 billion, the company said yesterday. Greenberg said the Zurich- based insurer refuses to sell coverage where prices are too low.

Rates may not increase until 2011 as insurers compete for business in a shrinking market, Dave Bradford, an executive vice-president at Advisen Ltd. said in a report last week. US property and casualty insurers posted the biggest sales decline in half a century in 2008 as corporations scaled back purchases.

Businesses have fewer employees and facilities to cover because of the recession. "There are some cowboys out there," Greenberg said yesterday in a conference call when asked about casualty policies. "There are guys writing this at what we think are pretty nuts terms. It's not completely a disciplined market."

Ace is adding life insurance sales in nations including China and Vietnam, Greenberg said. In North America, the company's largest market, premium revenue declined amid growing competition for liability coverage. Greenberg didn't name the competitors that he believes are under-pricing.

Insurance executives who fail to keep their commitment to setting rates at profitable levels are like alcoholics who "keep swearing off drink until they get to next saloon", Liberty Mutual Group Inc. CEO Edmund (Ted) Kelly said on Tuesday in a conference call.

"Commercial markets have strolled into the saloon and will soon be staggering out."