The poor investment returns in 2008 are pushing insurers to increase premium rates and the "anticipated improvement in underwriting profitability underpins the sector's newly positive outlook," said PwC.

The positive outlook was evident in the last survey in 2008, the firm said, and appears to be continuing into this year. More than 60 percent of 90 firms surveyed expect premium rates to continue their upward trend over the next three months, it found.

PwC said demand for p-c insurance is not greatly affected by the current downturn and "business is expected to continue growing across personal and commercial lines."

Claims remain manageable, the report said, "although the negative effects of the economic downturn may take several quarters to emerge fully." However, improvements in pricing "have put profitability on an upward trend."

Insurers are controlling their operating costs and are making plans to recruit more people into the business, PwC found.

P-c insurance Brokers were described as being slightly less optimistic than they were three months ago, the survey found, but business growth was strong surpassing expectations. Employment numbers fell in the sector as a much higher rate than expected. The same rate of decline is expected in the next quarter.

On the life insurance side, carriers were found to be pessimistic, expecting "low levels of new business and overall profitability."

"Life companies are focusing all their effort on reassuring and retaining their existing customers," said the report.

The survey of the overall United Kingdom financial sector found overall sentiment "is still deteriorating, but not as quickly as at the end of last year."

Despite the continued economic downturn, executives may be becoming more optimistic because expectations have adjusted to the crisis and there is some expectation that the economic decline may begin to slow, said PwC.

The survey was paid for by CBI, a business association representing 240,000 firms in the United Kingdom. The survey was conducted between Feb. 18 and March 4 of this year.