A slowing economy, a turnaround in the soft market for commercial lines, increasing pressure from claims inflation and the diminishing influence of reserve releases is marking the change in the cycle for insurance industry.

In a presentation to the IAA seminar last week, Finity consultants Andrew Cohen and Loan-Anh Nguyen say benign weather conditions and the unexpected strength of reserve releases in commercial long-tail and compulsory third party lines have left loss ratios low and delayed any upturn over the past few years.

Projections to 2011 show insurance trading results and returns on equity well below the experience of recent years.

“In light of the current volatility in the investment markets, we have allowed for significant losses for 2008 in the property and equity markets and the fall is the yield curve,” they said.

But they say the industry will still return “reasonable” results, with continued premium growth, rate increases in a number of classes, inflationary pressures and a return to a lower level of storm-related loss.