An ample supply of capital has delayed the arrival of a hard market, despite rate rises in most general insurance classes, according to a new report.

The third annual Pendulum report by Deutsche Bank and analysts Finity Consulting says the margin upswing will not occur until well into next year and will not affect domestic classes until the 2011 financial year.

The review of the state of the general insurance industry says a recovery from the collapse in bond yields is yet to occur and ongoing high levels of claims inflation are evident, particularly in personal lines.

Commercial rates are slowly making their way up but at no great pace thanks to the healthy state of balance sheets and ample capacity.

“Rates are undoubtedly firming across commercial but it would be a stretch to describe this as a cyclical upswing to hard market conditions,” the report says.

The analysts believe there are implications for lower releases in coming years in liability classes. And insurers will have to watch the weather, with the report suggesting they are not collecting adequate premium to cover flood losses.

Gross written premium is expected to grow this year in line with the 4.4% increase last year – and keep growing by 6-8% over 2010/11.