However, the industry's combined ratio climbed to 103.3 in the first quarter from 101.1 during the same quarter in 2010. First-quarter net income dropped to $7.8 billion from $8.9 billion.

“The deterioration in underwriting profitability as measured by the combined ratio is a particular cause for concern, because today's low investment yields, together with the long-term decline in investment leverage that helped insulate insurers from the ravages of the financial crisis and the Great Recession, mean insurers need better underwriting results just to be as profitable as they once were,” says David Sampson, president and CEO of PCI, in a statement.

The underwriting news could be worse when second quarter results are announced. ISO's Property Claims Services unit says second-quarter catastrophes caused $14.7 billion in insured losses as of June 20 and losses from several other events need to be added to the amount, Murray adds. Additionally, the stock markets are down, which could mean capital losses on investments, he says.

“Yet these near-term negatives could have positive implications farther down the road to the extent that they erase some of insurers' excess capacity and thereby hasten a turn in the insurance cycle,” Murray theorizes.

However, David Paul, a principal for the firm ALIRT Insurance Research in Windsor, Conn., used a proprietary method to score P&C insurers and found that the first-quarter combined score for the top-100 commercial-lines writers reveals the first indication in six years of a possible market turn.

Paul explained to NU earlier this year that ALIRT scores—derived every quarter from an analysis of operating and investment ratios as well as other financial-strength measures—range from 0-100, with higher scores assigned to stronger insurers. The 10-year median industry score is right in the middle—at 50.

A composite score below 50 may act as a leading indicator of a turn, Paul says, explaining that the score can be viewed as a “pain gauge” that can highlight the point when insurers “begin to get fearful about balance-sheet deterioration.” When the fear sets in, they may “draw firmer 'lines in the sand' as concerns pricing,” ALIRT says in its 2011 first-quarter analysis.

In its latest research, ALIRT says its composite score fell below 50 in the 2011 first quarter. 

The report shows that the score has been trending downward since early 2007, but has been above 50 since the middle of 2005. In contrast, back in 2001, the composite was closer to 35 as the market turned from soft to hard.

Spotlighting another positive development—from the perspective of insurers—the ALIRT first-quarter analysis notes that net-and-direct premiums written for the P&C composite of 1,600 insurers show marked upticks compared to last year's first quarter. Net premiums rose 3.6 percent over the prior first-quarter, and direct jumped 3.5 percent.

The report notes that the upward trends were likely driven by exposure-unit growth, since pricing surveys continue to show declining year-over-year rates.

 Growth in exposures—demand—“combined with potential exhaustion on the part of underwriters to chase price ever lower…is a positive development,” ALIRT concludes.

Meanwhile, despite falling commercial-renewal prices in the first quarter, a composite pricing index released by Advisen— a provider of insurance-related data and research—shows that prices are still 15 percent higher than at year-end 2000.

The Advisen index, based on reports from 1,200 risk managers, shows that average 2011 first-quarter commercial-renewal prices were 2.4 percent lower than in the 2010 first quarter.