From W.R. Berkley's perspective, the professional market is lagging behind casualty by about 12 to 24 months. Meanwhile, the property market continues to “fray around the edges,” as a result of the lack of cat activity, coupled with the increasing supply of reinsurance capacity. These two factors put downward pressure on pricing, the company says.

“The third quarter moved us forward in many ways,” explains William R. Berkley, chairman and CEO. “We continued to see our loss ratio improve and our return on equity increase.”

W.R. Berkley's return on equity was 12.7 percent for the latest quarter. Berkley says that cumulative pricing in the company's domestic insurance segment has risen about 18 percent over the past three years, noting its combined ratio should improve as these higher rates are fully reflected in earned premium. On an inflation-adjusted basis, current prices are nevertheless still below 2004's peak levels.

"Given current interest rates, we are focusing on improving underwriting margins by continuing to increase our rates and reduce our expense ratio," Berkley says. "Our non-fixed income portfolio contued to generate substantial gains, driven by our equity securities. We're optimistic that overall investment returns will improve over the next 18 months."

Average rates on renewed policies rose 6.4 percent during Q3 2013, compared to a 6.5-percent average rate hike for renewals in Q2, and 7.3 percent during the first quarter.

Cautious Loss Reserving

Pleased with the current financial trajectory, Berkley anticipates continued progress in the company's combined ratio over the coming year. “I feel fortunate to be looking ahead instead of looking back,” he says.

When asked to share the company's recipe for success, Berkley says that loss reserving remains one of many crucial drivers. Advocating a measured approach to loss reserving, Berkley cautions companies that are perhaps too eager to assume new risks:

"Some standard markets lack the appropriate knowledge to understand the risks they are assuming in the specialty area during soft conditions," he explains. "They see the 'grass as being greener on the other side' and move away from highly forecastable pieces of businesses. [Unfortunately] a number of these overly aggressive competitors are starting to pay the price for a lack of underwriting discipline, finding only 'astroturf' instead of grass."