Like any other business, the insurance industry goes through cycles, "and the reason they are more pronounced" for insurance "is because of the uncertainty" of balance sheet figures at any point in time, Mr. Timm said.

The NU feature, "E&S Market Replay Anticipated In 2011; Execs Detail Diverse Coping Strategies," which appears in the Nov. 22/29 edition, contains interviews with Mr. Timm and other E&S carrier executives conducted at this year's annual convention of the Kansas City, Mo.-based National Association of Professional Surplus Lines Office (NAPSLO), held in Atlanta last month.

The NAPSLO meeting took place a week after the annual Insurance Leadership Forum of the Council of Insurance Agents & Brokers, during which some broker executives had advanced a "new paradigm" hypothesis suggesting that the current market conditions will remain the way they are, making the soft market a "new normal."

Mr. Timm disagreed. The only things insurers know for sure are that their reserves are wrong, and their current loss picks are wrong, he continued, noting that they hope to err on "the right side of wrong."

With his commentary, Mr. Timm echoed the well-known views of William R. Berkley, chairman and chief executive officer of Greenwich, Conn.-based W.R. Berkley Corporation, who believes that insurers that use the past to predict future claims trends are now moving from being on the right side to the wrong side of wrong.

With reserve redundancies soon to be depleted, Mr. Berkley has gone on record predicting that the market cycle will turn during the 2010 fourth quarter.

Although Mr. Berkley was the only one of a dozen E&S executives interviewed to boldly predict a near-term turn, most repeated the same basic argument when asked for their prognoses.

"On some level, I think he's right," said Peter Eastwood, president and CEO of Lexington Insurance, referring to Mr. Berkley's arguments about the fundamentals of carrier performance. Cash flows are coming down, Mr. Eastwood said. "If you strip out prior-year development, accident year ratios have slipped over the 100 [breakeven] mark. Those fundamentals suggest that the market should be changing."

Louis Levinson, president of the E&S operations of Argo Group, said he believes industry loss reserve releases are done, adding that low interest rates mean "there is no money to be made there, and [that] insurers' combined ratios have to be creeping well beyond 100.

"There's no where else to go but to start driving rate," Mr. Levinson said.

"People in this industry are spending a lot of time bemoaning the state of the marketplace, but the reality of it is that this has been a cyclical business for decades," Mr. Eastwood concluded. "It's likely to remain a cyclical business. Good companies figure out ways to essentially adapt to the environment."

For more insight on the E&S executives' views on the market as well as other topics ranging from service enhancements and product innovations to organizational restructuring, see the NU featurein this week's edition.