NU Online News Service, April 20, 4:15 p.m. EST

Property and casualty insurance sector rates will begin to firm up in 2011, according to the most recent industry forecast from Conning Research & Consulting.

But first there will be larger underwriting losses this year and over the next few years results will be driven by the economic recovery and a return to a modest inflationary environment, the Hartford, Conn.-based company said.

The overall forecast in the report this year for net premium growth is for a level near 2 percent.

Conning Research & Consulting analyst Clint Harris said in a statement, "Our expectation is for modest growth in 2010, with net premium growth positive, but weaker than GDP growth."

But, he said the firm also anticipates deterioration in the loss ratio due to eroded premium rate adequacy and expected thinner loss reserve releases.

"While the overall combined ratio increase is a significant 2.5 points under average catastrophe load, implied return on equity should increase to approximately 7 percent due to the positive impact of realized capital gains," he explained.

The study, "Property-Casualty Forecast & Analysis" forecasts industry growth through 2012 and is based on Conning's proprietary industry model and analysis of key industry drivers as well as statutory data filings, public insurer reports results, and 2010 catastrophe loss estimates to date.

Preliminary 2009 data indicates over $5 billion of realized losses that mostly were recognized in the first half of the year, the report said. For 2010, 2011, and 2012 Conning is projecting insured catastrophe losses each year around $20 billion.

"Looking beyond 2010, more robust growth for the property-casualty industry in 2011 and 2012 will result from increases in both exposures and premium rates," said Stephan Christiansen, Conning research director.

"While personal lines is leading the industry even in 2010 with robust premium rate growth, many commercial lines, and particularly workers compensation, will not see improvements in combined ratio until 2012," he predicted.

Conning's "Property-Casualty Forecast & Analysis" costs $5,500 for four quarters and is available by calling (888) 707-1177 or online at <http://www.conningresearch.com/>.