Pointing to industry-underwriting deficiencies, he noted that the U.S. property and casualty industry has made an underwriting profit just five times in the past 35 years. Historically, investment income has been the panacea to overcome these losses, but recently it has fallen short of administering the remedy.

Lyons said the true state of the market is masked by slight upward movement in rates along middle-market businesses, property lines and worker's compensation.

And while he believes there is room for measured optimism—since industry barometers Market Scout, Advisen, CIAB and CLIPS agree that rates are improving—he said there has not been enough market pain to cause agreement on the degree of increases.

Lyons said that, without money coming in, approximately $100 billion would need to be liquidated out of the industry in order for a hard market to set in. This could come from catastrophe events, through the industry shoring up its reserve position, from interest-rate increases, or when the bonds that insurers have on the books are marked down and their assets dropped.

Lou Iglesias, president of property & casualty at Allied World, added at the Advisen conference that industry surplus hit a record of $565 billion in March 2011 and dropped by just 1.6 percent by the end of the year.

He also pointed to lower demand for insurance products, as demand levels are determined by the overall strength of the economy, which is predicted to grow by a sluggish 3 percent through 2012.

Iglesias suggested several steps that underwriters can take to help balance their business in the “Jell-o” market: address the strength of their risk selection criteria; practice adequate underwriting discipline; set adequate rates, terms and conditions; utilize predictive modeling tools; and most importantly, educate staff.

Regarding education, he said, “Years ago, Travelers, Hartford and Cigna all had training centers. Now we put people in an environment where they are expected to pick it up as they go along, or find a mentor who may be able to 'show them the ropes'—but no one has time to do that anymore.”

Iglesias also said insurers can re-allocate capital to growth areas like new lines of business and new geographical venues where they can make a margin instead of averaging it down.

He also recommended that brokers and risk managers consult one another to locate attractive exposures, and even drop biases against certain lines of business.

And even though it may be difficult to be confident about the state of the industry, the audience was reminded, they must remain confident businesspeople. Reassured Iglesias, “large barriers to entry are good: they eliminate competition.”