Two reports released in as many weeks confirm what brokers and underwriters on the Island have sensed for a few months now: the property and casualty (P&C) insurance market is showing signs it’s beginning to harden.Historically, the P&C insurance industry has set prices in alternating cycles, in ‘hard’ and ‘soft’ markets. When the market is soft, coverage is readily available and premiums stabilise or drop in cost. When the market is hard, insurance is scarce and premiums increase. These cycles are dictated by host of catalysts, including the economy, the frequency of catastrophic events, and insurers’ cash reserves.Insurers, of course, prefer hard markets. They’re then able to raise premiums and turn down underwriting business they consider too risky. In the wake of a record year for catastrophic losses, there are new signs of recovery, or hardening, in the property and casualty market.The 2012 ‘Marketplace Realities’ report, released by Willis Group Holdings last week reveals rates are increasing and Towers and Watson’s ‘2012 Risk and Finance Manager Survey” found that 95 percent of insurance buyers have some concern over the hardening of the P&C market.In 2011, total economic losses (both insured and uninsured) due to disasters reached an estimated $250 billion, compared to $226 billion in 2010. With $108 billion in insured catastrophe losses, 2011 ranks as one of the most expensive years for the insurance industry, second only to 2005, the year when hurricanes Katrina, Wilma and Rita contributed to claims of more than $123 billion.According to Willis’ report, some lines are experiencing modest firming, but there is no uniform market hardening. The report predicts that catastrophe-exposed accounts that saw rates climb an average of five to ten percent in the fourth quarter of 2011 will exhibit a similar trend throughout 2012 with increases in the 7.5 to 12.5 percent range.“So as rates may rise here and there and you may need to do something you have not done in several years — present unpleasant news at budget time — keep in mind not just the cost but the value of what you’re buying. You’ve been paying less — in many cases much less — for things that are hard to put a price on: protection, resilience and the freedom from risk that allows you to take chances and achieve what you and your stakeholders want most to achieve,” Willis Chairman and CEO Joe Plumeri noted in a press release.Amid growing concern, the Towers and Watson survey found a vast majority of corporate risk managers at US companies are taking steps to prepare for a hardening P&C insurance market.Nearly two-thirds of survey participants are either seriously or moderately concerned over a hardening P&C insurance market. Another third expressed slight concern. In response to this concern, companies are taking many steps to prepare. Among property respondents, nearly 70 percent are now marketing their programs, while slightly fewer casualty respondents (63 percent) are doing so. Additionally, a third of property respondents are using broker-provided catastrophe modelling, while 44 percent of casualty respondents are using actuary-provided retained loss analytics, and 30 percent are using predictive modelling.“With all signs pointing to a hardening market, actively engaging in the use of analytics is a great way for companies to prepare themselves for change,” said Steve Levene, Risk Advisory and Brokerage practice leader. “This also provides brokers with an opportunity to help their clients better see the linkage between effective analytics and preparation for a hardening market. It is a connection that was not as essential in a soft market, where coverage was more accessible and relatively inexpensive.”The survey also found that while enterprise risk management (ERM) programs are in place for a majority of respondents, progress in maturing them beyond qualitative efforts have stalled. 72 percent have not purchased network security/privacy liability coverage despite compelling reasons to do so.“Despite the media coverage and magnitude of network security risk, what’s impacting whether people buy cyber insurance is confidence in their own IT departments,” Mr Nelson said. “IT staff has a vested interest in not advocating for cyber insurance because needing it undermines the perceived reputation of the IT department when it asks to purchase it.”