Europe’s sovereign-debt crisis could impair the U.S. property and casualty industry’s ability to change the course of the soft market—if it results in the economy falling into another recession, according to one industry consultant.

Commenting on the current state of the insurance marketplace, Charles Ruoff, president of CR Market Strategies Inc., says in a Nov. 28 report that recessions have historically put a damper on the industry’s ability to “alter the direction of soft-market cycles on its own initiative.”

From 1967 through 2009, periods of recession have dramatically affected pretax operating income, Ruoff says, noting that it has fallen as much as 10 percent during these recessionary periods.

The rise and fall in operating income has also mirrored the U.S. gross domestic product, rising and falling almost in tandem over the same period.

Spending on U.S. commercial insurance, he notes, “is directly influenced by economic conditions as commercial and institutional buyers will adjust risk-retention/transfer decisions in direct relation to economic realities and outlook.”

Ruoff says excess capital remains in the foreign reinsurance markets and in the United States. Despite an unusually active global catastrophe year, insured losses were “widely spread,” making capital reductions modest and “not market-turning events,” he adds.

“The largest global reinsurers are on track to good earnings in 2011 despite the catastrophe losses,” says Ruoff. “That is a credit to the shock-absorbing ability of the market resources and the fact that much of the catastrophe costs are ultimately absorbed directly or indirectly by government programs.”

Considering how unstable the eurozone remains financially, if Europe pushes the United States into another recession, then “the P&C underwriting market will have to wait possibly until sometime in 2013 before a cyclical-type pricing change in commercial rates can be realized.”