Insurance rates in some short-tail lines are rising and conditions are becoming right for a more general price hardening in the market, according to XL Insurance Bermuda Ltd president Patrick Tannock.Mr Tannock spoke with The Royal Gazette yesterday from Vancouver, where he was one of the panellists at the Bermuda Market Breakfast event at the Risk and Insurance Management Society (RIMS) annual conference.The re/insurance market has endured a long soft market, but after a series of massive catastrophe losses relating to earthquakes in Japan and New Zealand and flooding in Australia, some industry executives are seeing signs of the market changing direction.“We have tangible evidence of increases in some short-tail lines of business, especially property,” Mr Tannock said. “Some of the swagger we’ve seen from the brokers in demanding rate increases has evaporated during the last few weeks, particularly since the Japanese earthquake and tsunami.”Reiterating points he made on the breakfast panel, Mr Tannock said there were four factors needed to realise a sustained change in the market: large sustained underwriting losses; a decline in industry surplus; a tightening reinsurance market; and renewed management underwriting discipline.“On the first point, we [the industry] have had more than $50 billion in insured losses since the third quarter of 2010,” Mr Tannock said. “If that’s not significant losses, I don’t know what is.”This did not take into account the damage from the tornadoes that have blitzed southern areas of the United States in recent days. Also the high losses this year had come before the hurricane season had even started, he added.“There has been a decline in surplus, although there is still about $50 billion in industry surplus, according to the latest estimates,” Mr Tannock said.“We have also seen signs of a tighter reinsurance market. When you factor in that 20 percent of the reinsurance market is in the Asia-Pacific region, then rates are going to be significantly higher.”With some significant treaties coming up in mid-year, Mr Tannock suggested that this could be an inflection point for the reinsurance market.With regard to the Bermuda market, Mr Tannock said he’d also seen signs of renewed discipline in underwriting, with both established and newer players no longer chasing market share.“If this [the catastrophe losses since the third quarter] does not give some of the executives recognition when it comes to pricing discipline, I don’t know what will,” he added.Other factors were also adding to the upward pressure on pricing. These include the new regulatory requirements being introduced in the European Union from 2013, known as Solvency II, which will require insurers to hold more capital. Another factor is that a new hurricane model from catastrophe modeller Risk Management Solutions (RMS 11) was introduced earlier this year and the update could have an impact on rates.A major hurricane making landfall in the US though he stressed he wouldn’t wish it on anyone would probably be “a tipping point” for the market, Mr Tannock added.One of Mr Tannock’s fellow panellists in Vancouver was Shelby Weldon, director of insurance licensing and authorisation for insurance regulator the Bermuda Monetary Authority.The XLIB president said he felt confident that the BMA was “getting the balance right” in its pursuit of equivalency with Solvency II between maintaining the regulatory characteristics that had served the Island well and achieving internationally recognised standards of regulation.XL Group went through a turbulent period in 2008 and 2009, and made huge losses in relation to its exposure to bond insurer Syncora and credit-related investments. The company’s turnaround has convinced clients, Mr Tannock said.“It’s been a great RIMS for XL,” he said. “We are not just back, we are moving forward. We have re-established ourselves as the must-see market. XL’s a very exciting place to be. We’ve had a number of meetings and have had a very positive reception from clients and distribution partners.”The overall objective for XLIB was to maximise its visibility, he said. To this end the group’s Bermuda-based insurance operation had staged more than 50 meetings in the Canadian west-coast city.In addition, XL Insurance held a 25th anniversary celebration in Vancouver Aquarium in Stanley Park on Monday night that was attended by about 700 people.