In fact, Mr. Hartwig said that, excluding the third quarter, 2005 would have been "the best year the industry has had in decades," in terms of profitability. With the impact of the storms, however, "that will not happen," he added. Instead, Mr. Hartwig predicted that the insurance industry will have a "single-digit ROE for 2005," a year which he noted could have been the high point of the current insurance cycle.

"Unfortunately, this year would have been the year in which we'd see the peak," he said. Last year was expected to be a high water mark for the insurance industry, he added, but it was also impacted by a series of storms.

The news is not all bad, however, he said, noting that prior to Hurricane Katrina, "the industry was in extraordinarily sound shape financially" during the first half of 2005. He said those results will help it cover losses inflicted by the hurricanes.

According to the Insurance Services Office (ISO) and the Property and Casualty Insurers Association of America, the domestic property and casualty insurance industry's net income after taxes increased by almost 30 percent to $30.9 billion during the first half of this year, up from $23.9 billion during the same period in 2004.

That income is higher than any experienced by the property and casualty industry since ISO began compiling quarterly records in 1986, both before and after adjusting for inflation. The industry surplus as of June 30 was also at a record high both with and without the adjustment.

"Insurers' underwriting results for first-half 2005 were truly remarkable," said John J. Kollar, vice president for consulting and research at ISO. "At 92.7 percent, the combined ratio for first-half 2005 was the best first-half combined ratio since the start of quarterly records extending back to 1986. Insurers' record net gains on underwriting in first-half 2005 were all the more remarkable given that, prior to 2004, insurers suffered net losses on underwriting during the first half of every year."

Net gains on underwriting for the property and casualty insurance industry increased 43.5 percent to $13.2 billion in first-half 2005, from $9.2 billion during the same period in 2004, with the industry combined ratio improving 1.5 percent to 92.7 percent from 94.3 percent. Investment income for property and casualty insurers also increased dramatically by 32.7 percent from $19 billion during the first half of 2004 to $25.3 billion during the first half of this year.

Although the hurricanes will cause a severe loss in the third quarter, Mr. Hartwig predicted that the p-c industry will be able to withstand the loss.

"The industry will be able to bounce back," he said, adding that "insolvencies are not really a concern."

As an indicator of this, Mr. Hartwig said the availability of capital remains high, with $3.8 billion in capital already announced in the month since Hurricane Katrina hit. This increased availability of capital, he said, will also keep the market from returning to a hardening state.

"There's a lot of wishful thinking out there that Katrina will turn the market hard," in a manner similar to that after the Sept. 11, 2001 attacks, Mr. Hartwig said. "That won't happen."

In fact, he said, "it's easier than ever to raise capital and bring new capital into the insurance business." The "basic effect" of this new influx and availability of capital, he said, is the tempering of any price increases.

Mr. Hartwig noted that there will, of course, be some price increases in the wake of the hurricanes, but he said that these would likely be "limited and concentrated" to the areas and lines most affected by the storm, particularly homeowners coverage, commercial property coverage and reinsurance for exposures in the Gulf Coast areas.