There is also concern that the revised hurricane-catastrophe model being released by Risk Management Solutions (RMS) will put pressure on rates.

“Given these changing market fundamentals, there is insufficient support for the continuation of a softening market cycle,” Bacon notes.

The Risk and Insurance Management Society Benchmark Survey, administered by Advisen Ltd., also noted high capacity—and found that three of the four lines of business tracked posted material decreases in average renewal premium, as reported by risk managers.

While underwriters have tried to hold the line on premiums, capacity is high and their resolve has shown some “cracks,” says Advisen's executive vice president, Dave Bradford.

Bradford tells NU that because of the poor economy, risk managers have had to stay within budgetary parameters. They have had to find ways to cut insurance coverage costs by purchasing less coverage and/or taking higher retentions—“but that just increases the capacity,” he observes.

He adds that he was “actually surprised to see over the past couple of quarters how well rates were holding up, given the enormous amount of capacity in the market.”

“When talking to risk managers,” he says, “they confirmed that insurers were willing to hold the line on prices and walk away from some risks.”

However, he says, “I couldn't see that holding up indefinitely. We're seeing, at least for this quarter, some cracks in that resolve.”

The survey found that commercial-property insurance posted the largest rate decrease, falling 4.2 percent on average for policies renewing during the quarter. The average workers' compensation premium fell 3.2 percent, and the average directors and officers premium dropped 2.3 percent.

General liability was the only line tracked by the survey to not record a material decrease, declining only 0.8 percent.

Another report released by Conning Research and Consulting says P&C insurers can expect moderate net premium growth but additional deterioration in underwriting results for 2011.

In its forecast for 2011-2013, Conning says 2011 will likely see premium growth between 3 percent and 4 percent. “Expected small increases in premium exposures in personal auto and in most commercial lines are the principal drivers of the premium increase,” Conning says.

However, the firm projects that underwriting results will deteriorate by around 2 percent for 2011. Conning says price competition will likely continue in long-tailed commercial lines such as workers' comp throughout the year, but the pace of competition should moderate. “Loss ratios are expected to increase with the economic recovery as higher-hazard job growth increases frequency and severity of average claims,” Conning says.

The firm notes that personal and commercial lines have “developed divergent pricing environments.” While rates are increasing in personal lines, Conning says, commercial lines remain soft.

Conning expects a combined ratio of 103.2 for 2011, up from an estimated 2010 combined ratio of 101.5.

For 2012 and 2013, Conning says it expects premium-rate firming in commercial lines. “The turnaround in commercial pricing anticipates that insurers will respond to deteriorating underwriting results and operating ratios over 90 percent in some lines of business, such as workers' compensation,” Conning explains.