Matt Mosher, senior vice president, global rating for A.M. Best Co., says A.M. Best wants to see that a company has someone, principally a chief risk officer, who can demonstrate that the company understands its risks and is managing them in a way that is acceptable to the management team.

Mosher says there remains a lot of pressure on mutual insurers to maintain their capital base. He points to a combined ratio of 116 for the first half of this year for mutuals, underscoring the pressures carriers face.

“Early in the cycle we did not see a combined ratio of 100,” says Joe Petrelli, president of Demotech. “Now we’re waiting for the bottom of the cycle.”

Petrelli’s assessment is that, like the economy, the bounce back in the insurance market will not come all at once, but in segments based on the line of business.

While prices may need to rise, Petrelli says, there is another dynamic at play. Despite the high level of catastrophes for the first half of this year, insurers still have a lot of surplus on their books.

“The soft market needs to end, but with all that surplus, we are just not there yet,” Petrelli says.

Another soft-market driver, Mosher says, is that publicly traded insurance carriers can go to stockholders to raise money to replace capital. This, he says, is still driving prices lower as consumers continue to buy based on price.

However, he questions how much longer insurers will be able to sustain substantial losses, such as those seen year, while ignoring underwriting profitability.

Touching on international regulatory issues, Petrelli notes that under Solvency II (the European Union’s financial-modernization regulatory regime) only two countries—Bermuda and Switzerland—have received equivalency with EU mandates. That means the EU will recognize those two nations’ regulators as being on even footing with Solvency II requirements, allowing companies based there to write business in EU countries.

He says the reason the U.S. has yet to receive the same equivalency designation is because the EU is looking at a nation’s regulatory environment as a whole. However, since the United States is state-based, the EU regulators have not reached “a comfortable level” to approve equivalency.

Mosher says the EU is working on ways to achieve equivalency and accept the United States model.

“I believe that any U.S. regulator can go head to head with Bermuda or Switzerland,” says Petrelli.