Based on analytical evidence from Aon’s annual $60bn of placed commercial risk, overall global rates were down about 3.3% in the second quarter of 2011. This compares with down 3.8% in the first three months of 2011 and down 4.4% at end of last year.

These figures reflect a soft market in general but with reductions in rates falling.

Mr Case believes that in the absence of a major event this trend is going to continue as the supply/demand imbalance of capital remains strongly in the favour of buyers.

“A year and a half ago we said that the supply/demand imbalance was about one hundred billion dollars…We have seen a lot of events since then but when you add them all up they are in the order of forty to sixty billion dollars, still not past the inflection point. When you think about putting that in perspective hurricanes Katrina, Rita, Wilma—some of the biggest events in the history of insured risk—were forty, fifty and sixty billion dollar events. So that is the kind of supply/demand imbalance we still have,” said Mr Case.

Marsh’s Chief Executive Officer David Batchelor generally agreed with Mr Case and concluded that overall the third quarter was ‘pretty neutral’ in terms of rate increases or decreases.

He pointed out that there were some increases for natural catastrophe exposures and for certain loss prone industries.

JLT’s International Network’s Managing Director Rory MacLeay backed up his fellow brokers’ summary of the market. He noted that in various corners of the world rates are still softening dramatically. In geographies such as China, central eastern Europe and Latin America there are still ‘astonishing’ drops in rates of up to 20%, he said.

Marsh’s Mr Batchelor pointed out that strong economic growth in emerging markets is translating into increased premium for insurers, which is helping to balance their books and offset reductions in premium income in many parts of the developed world.

But he warned that at some point current market and macro economic conditions are going to take their toll on pricing and noted that the economic turmoil in Europe may start to translate into risk pricing in 2012, particularly for the banking sector and professional lines.

“When you look at all of the economics that make up our market place—low interest rates, high combined ratios and cat losses at their current level—you have to figure at some point they are going to translate into price,” he said. “At the moment it does not seem that way but it will be interesting to see what happens around the fourth quarter reinsurance treaty renewals and their impact on primary pricing,” he added.

The insurers on the panel were keen to stress the pressure that they are under and the likely knock-on effects for buyers.

There is a lot of tension and uncertainty in the market, said August Pröbstl, Head of Munich Re’s Corporate Insurance Partner division, driven by various market conditions and heavy losses.

“So historically you would think this would lead to a broader market hardening. We have seen some hardening in certain lines and geographies but overall it is fairly stable. There is uncertainty—the all time low interest rate environment and volatile equity markets for example—so I would assume that everybody in the industry recognises that not only in the short term, but also in the longer term profitability has to come from our core business. For us this is underwriting so I would imagine more discipline,” he argued.

But he conceded that there remains a hefty amount of capital still within the market.

According to Torbjörn Magnusson, Chief Executive Officer of Swedish-based If P&C Insurance Company, present information suggests that interest rates will be exceedingly low for the next few years and as a result there will be little in the way of investment returns for carriers. “Therefore rates will have to increase. Whether those decisions will be taken now or in six to twelve months’ time I don't know,” he said.

ACE’s Country Manager for France, Jeff Moghrabi, said that a combination of events—natural catastrophe losses, low interest rates, inflation and regulation —will most likely combine to finally push rate increases through. “In this volatile climate no actor (insurer) regardless of size and diversification can feasibly run a combined ratio above 100% for a long time, how credible is that actor going to be to his partners—the brokers and risk managers,” he said.

Insurers’ combined ratios have been under pressure with some of the largest reporting combined ratios well above 100% in the first half of this year.

But extreme market turns may be a thing of the past, argued Chartis’ Mr Baugh.

Since the market turn of 2001 there are signs that better technical pricing, which has already resulted in many hardenings in different parts of the market, such as the airline industry and financial institution arena, is releasing the pressure on the market as a whole, he argued.

“That is good news because a bubble was building up in 2001. Inverse of a housing bubble it was a bubble of depression that was building up and creating pressure. What you see in the last three years is that there are many hardenings taking place in the market. Each time there is one of those mini corrections they are helping to release some of that pressure that is building up for a potential cycle,” he explained.

He flagged up recent McKinsey Global Institute insurance market analysis that suggests a dampening of the cyclical impact. “I hope that is true as it is the right thing for us to deliver as a product and I am reasonably confident that there is some evidence of things moving in that direction,” he concluded.

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