The P&C commercial market hasofficially achieved hard-market status, according to the Council ofInsurance Agents and Brokers (CIAB)—although some executives atmajor carriers remain skeptical.

“We've been cautious up to now about declaring a market turn,but it's reasonable to say that the market has made a hard turnafter two quarters of price increases and tighter underwriting,”Ken A. Crerar, CIAB's president and CEO, says in a statementaccompanying the results of the association's latest quarterlymarket survey.

“It's difficult to predict length and severity, but the markethas turned,” he adds.

According to the survey, pricing for small, medium and largecommercial accounts was up an average of 4.4 percent during thefirst quarter.

The increase continues a trend. Pricing was up an average of 2.7percent on all accounts during 2011's fourth quarter after startingto edge up nearly 1 percent in Q3 2011, according to CIAB.

Going back a year, pricing was down 2.9 percent on small, mediumand large accounts during the first quarter of 2011.

Brokers who responded to CIAB's survey say losses fromcatastrophes have driven rate increases. Hard-to-find coveragessuch as earthquake and flood increased 25 percent, says one broker.RMS Version 11 also has elevated rates, especially in coastalareas.

The greatest increase from the fourth quarter of last year to Q12012 was seen in large accounts. Rates were up an average of 4.1percent in Q1 compared to an increase of 1.6 percent during 2011'sfourth quarter.

By line, Workers' Compensation and Commercial Property appear tobe leading the rate-hardening charge. Workers' Comp prices were up7.4 percent in 2012's first quarter after rising 7.5 percent duringQ4 2011.

Commercial Property was up 6.5 percent for the first quarter of2012. Pricing in the line was up 5.7 percent in 2011's finalquarter.

Dallas-based MarketScout's latest Market Barometer for Aprilsupports CIAB's survey results regarding the direction of pricing.According to MarketScout, commercial P&C rates were up 3percent in April compared to a year ago.

The previous Market Barometers for January, February and Marchshowed rate increases of 1 percent, 2 percent and 3 percent,respectively, compared to the same months in 2011.

Broken down by insurance line, MarketScout says Workers' Compand Commercial Property rates both rose 4 percent in April—thehighest increases for the month. No lines showed rate decreases,and Fiduciary was the only line that came in flat. Threelines—Business Interruption, Crime and Surety—showed 1 percentincreases, while all other lines increased by either 2 percent or 3percent.

By account size, small, medium and large accounts all increasedby 3 percent, while jumbo accounts were up 2 percent.

Aside from rising rates, MarketScout notes that standardcarriers appear to be less inclined to write risks typicallyinsured by non-admitted carriers—a sign E&S executives look forto determine whether the market is truly turning.

“Recently, we have noticed admitted and non-admitted insurersare pricing similarly,” MarketScout CEO Richard Kerr says in astatement. “Historically, there has been a considerable differencein the underwriting approaches among the various types of insurers.The recent similar pricing strategies could ultimately lead to morebusiness for the non-admitted insurers as admitted insurers beginto restrict their risk appetite and simply decline to write tougheraccounts.”

Despite these recent rate increases, some carrier executives saypricing is still a long way from where it needs to be forinsurers.

In a keynote address at the recent Advisen Casualty InsightsConference in New York, Mark Lyons, CEO of Arch World WideInsurance Group, said overcapitalization is hiding losses onbusiness. “We have had $12 billion in reserves releases in the 2011calendar year alone…It has been three loss-ratio points of reservereleases over the past 3-4 years on average… [This is] shelteringlosses on current-year business and masking how unprofitablecurrent business is because of releases in this year from accidentswhich occurred prior.”

While Lyons believes there is room for measured optimism, hesaid there has not been enough market pain to cause universalagreement on the need for even more significant rate increases thanthose seen of late.

Lou Iglesias, president of P&C at Allied World, is alsounconvinced the industry has entered a hard market. He points totwo factors: that industry surplus hit a record of $565 billion inMarch 2011 and dropped by just 1.6 percent by the end of the year;and that there is lower demand for insurance products, as demandlevels are determined by the overall strength of the economy, whichis predicted to grow by a sluggish 3 percent through2012.