The report goes on to say that because the industry is exempt from anti-trust laws under the McCarran-Ferguson Act, "it can collude on important components of insurance prices, an anti-competitive practice that is illegal for other industries."

The authors say an example of this practice is being seen now where insurance companies at the bottom of a cycle are pressuring their competitors "to stop competing for premium dollars and to raise rates and reserves as an entire industry."

For the current cycle, the report says the industry is trying to use Hurricane Irene and other 2011 weather events to suggest that it is in financial trouble. "Hurricane Irene in late August 2011, which was greatly hyped by The Weather Channel but wasn't nearly the catastrophe that was expected, has been used by insurance-industry representatives to push the country into a new hard market," the report says.

It adds, "However, surpluses today…put the industry in an all-time safe financial position, far safer than required, and one might even say that today the industry is overcapitalized."

The report urges government action to:

• Require increased data disclosure to state authorities that can be used to refute allegations about the financial health of the industry.
• Enact stronger regulations to give insurance departments a "far more active role" in controlling insurance rates.
• Repeal McCarran-Ferguson, or at least allow the Federal Insurance Office to review its impact.

The report drew criticism from Insurance Information Institute President Robert Hartwig. He says, "While the report says insurers manufacture crises, the report, in fact, is manufacturing a phantom problem."

He says there are no problems in the market today with respect to price or availability, and adds that the report's suggestion to repeal McCarran-Ferguson is a "solution without a problem."

He questions the report's assertion of collusion among insurers, noting that prices have fallen for 30 quarters in a row until the 2011 second half. "It's hard to see evidence of collusion," Hartwig says.

Regarding the 2011 weather events and their impact on the industry, Hartwig says insured losses from catastrophes are expected to reach $108 billion. But he says while the catastrophes are a challenge, "they have by no means precipitated a 'crisis' as [the report] alleges. Insurance and reinsurance markets remain competitive, capacity is available and coverage remains affordable."

Hartwig suggests that over-regulation, rather than McCarran-Ferguson, is the real barrier to competition, noting that jurisdictions that dictate prices, such as the Florida homeowners market, have the biggest issues.

He also challenges the report's claim that hard markets are never caused by jumps in claims. Hartwig says it is "demonstrable" that higher prices result from higher underlying losses.