Editor's Note: As much as welove to sound off each week, we love even more the chance to speakwith interesting industry executives—and to share theirperspectives on crucial trends with you.

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Kicking things off is our conversation with Robert P.Hartwig, noted economist and president of the InsuranceInformation Institute.

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NU: What can we infer about current marketconditions from seven straight quarters of premiumgrowth?

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HARTWIG: There are two conclusions that can bedrawn from the fact that the industry has experienced sevenconsecutive quarters of premium growth.  The first is thatthe “era of mass exposure destruction” has ended, and a recoveryhas begun. 

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In other words, the end of the “Great Recession” in mid-2009helped lead to an increase in exposures by the first half of 2010.That growth continued and even accelerated through 2011. Theexposure gains are particularly pronounced in areas such aspayroll, which is the exposure base for Workers' Compensation.

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The second factor is that rate increases are beginning to takehold. While personal-lines pricing has trended positive for thepast several years, commercial-lines pricing turned positive onlyduring the second half of 2011 following 30 consecutive quarters ofnegative renewals.

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What's the situation with the release of prior-yearreserves? How much longer can the industry count on these releasesto prop itself up?   

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Release of prior-year reserves gave a boost to the industry'sbottom line once again in 2011, helping to blunt some of the impactfrom high catastrophe losses. It is likely that many insurers willbe able to release meaningful prior-year reserves in 2012 andpossibly in 2013 as well, albeit at levels lower than in yearspast.

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We hear often of catastrophe losses but not much onlosses in non-cat lines, such as Workers' Comp. How much are thesetypes of losses contributing to the overall P&C combinedratio?

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Results in non-cat lines in 2011 appear to have been relativelystable. That said, Workers' Comp is the worst-performing of allmajor P&C lines—with a 2012 combined ratio in the neighborhoodof 117. Apart from Workers' Compensation, most other non-cat linesappear to have suffered only a small deterioration in theircalendar-year performance, on net.

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Are factors in line for real pressure on rates, or doesthere remain such an abundance in capacity that carriers willcontinue to heavily compete for accelerating exposure growth? 

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At the current point in time there is no catalyst that wouldlead to a traditional “hard market” in 2012 or 2013. Capacityremains adequate and is likely to expand in 2012. Underwritingresults—with some notable exception such as Workers' Comp—are notyet consistently disastrous, and reinsurance markets appear willingand able to meet demand for coverage even after the record-settingglobal catastrophe losses in 2011.

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—Interviewed by Chad Hemenway

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