NU Online News Service, July 20, 3:16 p.m. EDT

Commercial insurance is not on course for a hard market, but there are significant pricing and underwriting demands that suggest an end to the prolonged soft market, says a panel of insurance brokers.

The insurance broker Marsh, a member of Marsh and McLennan Companies, released its “U.S. Insurance Market 2011 Midyear Update” and held a webinar with six of the firm's brokers to review segments of the industry.

“The market is not hardening,” says Duncan Ellis, leader of Marsh U.S. property practice. “There is not a lack of capacity, but what we are seeing is pricing transition.”

That transition, he says, means policyholders in some cases are giving back on terms and conditions to offset rate increases.

Catastrophe exposure is driving underwriting primarily in the catastrophe and property areas, the executives note.

Ellis says April 1 was the “demarcation date on renewals” as insurers began to deal with the aftermath of losses from severe weather events in the United States and catastrophes from earthquake in New Zealand and the earthquake and tsunami in Japan.

He notes that 2011 is “on track to be the worst loss year in history,” depending on the results of this hurricane season.

He says that carriers are refocusing coverage, with some wanting to add tsunami as part of earthquake coverage, something that could become standard for carriers in the future.

While in the past it would have taken a substantial Atlantic hurricane strike to the United States to cause a disturbance in the marketplace, Ellis says that today “a moderate storm could have significant effect.”

He went on to say that if the hurricane season remains quiet in terms of losses then insurers would have time to “catch up on their losses” and end the year without serious impact to earnings.

That does not change the fact that “carriers are underwriting again” and asking a lot of questions about risks, says Ellis.

For property risks, he says pricing ranges from 15 percent increases and above for the most exposed property risks, to low-to-flat increases for lesser-exposed risks.

Clifford Rich, leader of market information for Guy Carpenter, the reinsurance brokerage firm subsidiary for Marsh & McLennan, notes the combination of catastrophe losses and exposure modeling changes from Risk Management Services' V.11 model has at the least stopped the price reductions of the past.

Today, he says, property reinsurance “is not hard but the reductions have ceased.” Pricing, he says, is either flat or experiencing “upward pressure.”

He also notes that on the casualty side of the market, prices have become “more stable” with reductions either slowing or stabilizing. In some cases there are increases.

Jonathan Zaffino, leader, Marsh's U.S. casualty practice says the market remains competitive, but “underwriters want more information.” On workers' compensation and general liability, he says he is seeing some slight increases.

LouAnn Layton, leader in Marsh's U.S. FINPRO practice described a marketplace where most renewals are down on directors and officers insurance for publicly held companies. The market there remains very competitive, she says.

However, with the implementation of Dodd-Frank regulations and creation of the Consumer Financial Protection Bureau, there is a greater potential for losses in the future.