The recession will suppress premium exposure growth and prompt aprolonged soft market for most commercial lines through 2010,Conning Research and Consulting predicts.

Indeed, the property and casualty market won't see a turnarounduntil 2011, Hartford-based Conning said in its latest forecast.

“The combination of continuedprice decreases in most commercial lines of business and therecession suppressing exposure growth continues a string ofnegative premium growth for 2009 that began in 2007,” noted ClintHarris, a Conning analyst.

On the positive side for sellers, however, Conning said it nowforesees more favorable loss and combined ratio results for thep&c insurance sector.

“Recessionary conditions also can suppress losses, includingreduced frequency from fewer exposure units and reduced lossseverity due to deflation in some property loss cost drivers,” saidMr. Harris.

Those factors, he added, mean “a trend of moderate deteriorationin the combined ratio through 2010 and modest improvement beginningin 2011–excluding unusual catastrophe experience or further turmoilin financial guaranty lines.”

The recovery in 2011 may lead to an increase in both premium andloss exposures, “but also may include the start of acceleration ininflationary factors that drive loss severity,” said StephanChristiansen, Conning research director.

Conning, he explained, “has seen indications of price-firming inpersonal lines but continued mixed conditions in commercial lines.Capital conditions remain strong, particularly in commercial lines,and it is likely that further stresses will have to occur beforeany significant broad-based change in pricing will emerge.”

One of the key drivers for the sector noted by the company is aseverely sagging home market and an increase in foreclosures, whichConning said is moving some of the exposure to excess and surpluslines residual market insurance products.

Among the lines examined in the report is personal auto, forwhich Conning said it projects a combined ratio of 99 in 2009, 97.6in 2010 and 96.4 in 2011.

Looking at homeowners insurance, Conning said it expectscombined ratios above 110 in 2009 through 2011.

The workers' compensation combined ratio will worsen by onepoint in 2009 and go to 103.3, while 2010 should see it stabilizeat 103.2, decreasing in 2011 to 102.6, Conning said.

For the general liability line, the company said it projectspremium growth of 2.5 percent in 2010 and 5 percent in 2011.

Conning's “Property-Casualty Forecast & Analysis” can bepurchased by calling (888) 707-1177 or by visitingwww.conningresearch.com.