A glimmer of optimism is emerging for insurers in the wake of what has been one of the most difficult quarters the industry has faced, as some suggesting the trend of declining rates could be about to change.

Bermuda insurers to have declared their third-quarter results so far have posted big declines in net income, as hefty claims resulting from hurricanes Gustav and Ike have added to the damage inflicted on their investment portfolios by the turmoil in world markets.

Balance sheets were generally in fine shape after the highly profitable years of 2006 and 2007 left the companies well capitalised.

The dramatic capital erosion that occured industry-wide in the third quarter, however, could reduce capacity to the point where rates begin to harden again, instead of the steady fall in the price of insurance that has been occurring over the past year and a half. Everest Re chief executive officer Joseph Taranto found grounds for optimisim in a conference call with investors on Tuesday, after his company had announced a third-quarter loss of $233 million. "The insurance market has been softening," Mr. Taranto told investors. "In past cycles it had taken many years of deteriorating rates and conditions before the market turns up.

"At the beginning of the quarter I thought we had years to go before better days appear. Now I see that timeframe dramatically reduced and expect portions of the reinsurance and insurance market to improve by the one-month renewal season."

Mr. Taranto said it was "easy to get down" after a quarter that had seen a meltdown in the financial system and the loss of companies with household names. "Perhaps, there were many excesses that needed to be running out of the system," Mr. Taranto said. "I trust they have been and we can now move forward. At Everest, despite the blood in the Street, we we have remained strong, with our client base intact, our employees committed and our ratings among the highest in the business.

"Going forward, I expect the world will be very different and that these changes will work to our benefit. As a reinsurer, we are a capacity provider. Well, many of our clients are suddenly in need of more capacity, we'll try to help."

Another restrictive factor on capacity during the markets turmoil is that "much of the money that so easily came into our space from hedge funds and other sources has dried up," Mr. Taranto said.

On Tuesday, another Bermuda company, Platinum Underwriters, announced a loss of $45.3 million. In his comments on the results, Platinum CEO Michael Price saw opportunity ahead.

"Our outlook for market conditions is cautiously optimistic," he said. "Given the challenging state of the credit and equity markets, we expect increasing demand for reinsurance. However, reinsurers may be reluctant to provide capacity without appropriate rate increases."

Last week, XL Capital CEO Michael McGavick held a conference call in which he alluded to improving market conditions after "very significant catastrophe activity in the (third) quarter and also the significant effects on capitalisation by virtue of these historic gyrations in the economy".

Mr. McGavick added: "This is all pointing to a better environment for the property and casualty industry. So, while we not only are pleased with the momentum in terms of new sales and business we're looking at right now, we're also pleased with the market conditions and feel well positioned to take advantage of them."