The Hard Market is Coming (But Don't Hold Your Breath)

A five-year soft market, fueled by chronic overcapacity, is coming to an end. Following two years of record profits, losses from both underwriting and investment activities are destroying excess insurance capacity, signaling that the bottom of the commercial insurance pricing cycle is near.

Average rate levels for commercial insurance will level off by the second quarter of 2009 and will begin to creep higher beginning the fourth quarter of 2009 or the first quarter of 2010. However, a deepening global recession may delay the return of hard market conditions by suppressing demand for insurance. In the absence of major natural catastrophes, which could trigger skyrocketing premiums, the hard market will be more gradual, and also more prolonged, than has been the case in recent cycles.