With available risks to insure on a steep decline, he said, “that means no dramatic change in the top line–which, combined with falling investment income, means no dramatic impact on the bottom line, either.” As a result, he observed, “the instant gratification that usually comes from a hard market won't be available this time around.”

Still, for the moment at least, “[insurance] supply has gone down more swiftly than demand,” due to “staggering investment losses” for many carriers, he observed, forcing insurers to raise prices to compensate.

He said the reinsurance sector is leading the charge into a harder market, reporting that for Jan. 1 renewals, rates are 10 percent higher for national accounts and up 15 percent for regional risks, on average. The higher cost of reinsurance will put additional pressure on primary carriers to raise their own prices to keep pace, he added.

Warning that p-c insurers are navigating in “unchartered waters,” Mr. Duperreault said that “while we may be entering a harder market, we must continue to operate as if we're still in a soft market. That means vigorous expense control, claims management and underwriting discipline.”

Predicting that the positive effects of a hardening market for insurers “will become visible eventually,” he said a significant catalyst will be needed–such as a “reinvigorated economy or a rebounding investment market.”

He also warned, however, that a major disaster loss could change the p-c landscape in a hurry, prompting a much harder market and stiffer rate hikes virtually overnight.

“The p-c industry remains well-capitalized, despite the huge hits we've taken on the investment side, but our cushion is far thinner,” noted Mr. Duperreault. With capital very hard to come by after the huge financial losses absorbed by hedge funds and other private equity investors, it will be hard to expand capacity if a significant disaster strikes, “leaving us vulnerable to a major catastrophic event,” he explained.

Mr. Duperreault said despite the fact that it “looks like 2009 will be another tumultuous year for the insurance industry, the investment markets and the economy,” the good news is that “the much-maligned p-c industry has weathered this storm. We've come through in far better shape than banking has.”

Indeed, he lauded the insurance industry for its more responsible approach to risk. “As insurers, we think more about holding risk than trading it”–as opposed to banks, which packaged reckless subprime loans and passed them off to investors in what turned out to be toxic securities.

“We are professional gamblers,” he said, “but at least we know the odds on most bets we make.”

Conceding that “we're in for some very tough times,” he told the packed house to “thank God you still have a job and work in an industry that's basically okay and well-capitalized and which generally did not have to run to the Fed's window for money.”

Outside of a handful of carriers–mostly on the life insurance side–that are scurrying to tap federal funds from the Troubled Asset Relief Program, he said “we work in an industry that's needed, relevant and which stood the test of time.”

While Mr. Duperreault predicted a hard market, albeit an invisible one, other insurance executives expect continued rate declines for major insurance lines, according a recent survey by the Insurance Information Institute.

I.I.I. polled insurance executives who gathered at the 12th annual Property/Casualty Insurance Joint Industry Forum in New York in January, finding that the executives expect less profitability and flat-to-negative overall premium growth this year.

Sixty-two percent of respondents said they expect no improvement in pricing for commercial lines.

Additionally, 50 percent said overall industry premium growth will remain flat, and 33 percent said it will be negative. Just 17 percent said they believe premium growth will be positive.

Fifty-nine percent said they expect the combined ratio to be higher in 2009 than it was in 2008.

For investments, 59 percent of respondents said they expect another down year in the equity markets.

Just 5 percent of respondents believed trends in litigation activity will improve. Thirty-two percent said tort trends will stay the same and 63 percent said they will deteriorate.

Seventy-six percent of respondents said they expect consolidation among insurers and reinsurers.

Respondents also did not see action coming from Congress on regulatory or national catastrophe issues.

Ninety-three percent said they do not expect national catastrophe legislation, largely based on the view that other matters will take higher priority, according to I.I.I. Fifty-one percent did not see optional federal insurance charter legislation gaining momentum this year.

“Looking forward to 2009, owing partly to the weak economy, the year is likely to see a soft market, which has persisted for some years,” said Steven N. Weisbart, I.I.I. senior vice president. “Low interest rates and a weak investment climate are unlikely to provide a significant source of profits for the industry,” he added.