While there are doubts about whether the property and casualty insurance industry is getting set to enter a hard-market cycle, it increasingly looks like rates are beginning to stabilize in many lines, according to observations by an industry report and some chief executives.

“The market is not hardening,” says Duncan Ellis, leader of Marsh’s U.S. property practice, during a webinar held in conjunction with the broker’s release of a report, “U.S. Insurance Market 2011 Midyear Update.”

“There is not a lack of capacity, but what we are seeing is pricing transition,” Ellis adds.

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

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 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 of 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.

During a conference call announcing Chubb Corp.’s second-quarter results, Dino Robusto, president of personal lines, says the U.S. insurance industry is increasing auto rates in the low-single digits and hiking up home-insurance rates in the mid-single digits, “which is understandable given the industry’s poor results over the last several years.” 

Chubb’s commercial segment saw renewal rates during the second quarter go up 2 percent—the first increase in five quarters, says Paul Krump, president of commercial and specialty lines, during the call. 

“Given all the unusually severe weather in the first six months of the year, insurance buyers were reminded almost daily that no region of the country is safe from catastrophes,” Krump observes. “Against this backdrop, our U.S. agents and brokers who handle standard commercial lines are generally having an easier time articulating the need for higher rates.”

Krump adds that “there is still plenty of excess capital in the industry,” but price improvements are being driven by the catastrophe losses and new catastrophe models.

In another second-quarter conference call, W.R. Berkley Chairman and CEO William R. Berkley says that while rate increases are positive—though they vary by line and geography—loss costs are also increasing, which leads him to “anticipate accelerating rate increases as the year progresses.”

Loss costs “directionally have turned from a long-term decline to upward slightly—not a lot, but there is a change,” Berkley explains.

W. Robert Berkley, the company’s president and COO, says the primary workers’ comp market is showing some encouraging signs of improvement as well, but excess workers’ comp is not revealing any “noteworthy discipline.” 

Despite the signs of rate increases, though, one analyst says that not only is the market not hardening—but it might not turn until 2013.

In a recent newsletter, Charles L. Ruoff, president of CR Market Strategies Inc., says P&C figures may not be as bad as some believe, and because of that a change in the soft-market direction may not come anytime soon.

“Looking beneath the headline numbers, we see the continuing negative influence of the mortgage and financial-guaranty markets making the overall industry figures look worse,” he says. He also notes that overseas losses experienced by U.S. reinsurers are a factor in making the figures look worse than they are.

Using numbers supplied by ISO, he says U.S. reinsurance and mortgage and financial-guaranty insurers account for close to 8 percent of industry premium—but account for a little more than 73 percent of reported underwriting losses. Without those two segments, the industry combined ratio in the 2011 first quarter stands at 101.2, rather than 103.3.

“So the core industry looks to be a bit more profitable if these ‘outlier’ segments are removed, as each beats to a different marketing drum within the overall market,” he says.

He continues, “The take-away here is that the ‘core’ market is not as distressed in terms of underwriting results as the broader market view would have you believe. That is not exactly news, but in the effort to time the market-cycle change, it becomes very important.”