Bermuda's insurance industry see an increase in insurance rates in the wake of higher underwriting losses and the financial crisis this year.

A combination of the impact of the destruction wreaked by Hurricanes Gustav and Ike and the current economic turmoil has caused the previously downbeat forecast on pricing made 60 days ago to be revised with a prediction of price rises, according to the Bermuda Quarterly report for nine months of 2008 released by Aon Benfield yesterday.

The report quotes Evan Greenberg, chairman of ACE, as saying: "In sum, the end of the soft market in insurance has arrived."

It also said the financial downturn suffered by American International Group, on of the largest capacity providers in the primary market, was, in the view of John Charman, chief executive and president of Axis Capital: "The haystack, not the straw that broke our industry camel's back."

In the fall-out from the situation, Endurance has seen both brokers and clients alike taking a much more conservative approach to assigning large lines to individual insurers, while lead positions were being changed, allowing the market to re-underwrite and re-price business, with clients looking for quality in exchange for flat to upward pricing trends on placements with companies not affected by financial uncertainty, said the report.

Ace, the largest insurance company in the Bermuda group featured in the report, reported increased submissions as business shifted from weaker competitors, up more than 31 percent from late September to early October over the previous year, with submissions for large accounts up 80 percent.

But while there were strong indicators of a hardening insurance market, the drought in the capital markets and increasing expenses incurred by firms was a concern, the report found, claiming reinsurance could be the answer for some, putting upward pressure on pricing as reinsurers in turn reassess their risks, having a knock-on effect of increasing prices in the insurance sector.

Christopher O'Kane, CEO of Aspen, was quoted in the report as saying he was hopeful of an upturn in market fortunes for the first time since the company went public company in February 2004.

However, he added: "To be hopeful is not the same as to be completely persuaded that a general market correction has arrived."

Michael Price, president and chief underwriting officer of Platinum, said it was not a scenario, unlike 2005, when there was an instant recognition that rates must go up, the report added, while Jim Bryce, CEO and president of IPC expected to see double-digit increases for renewal rates on January 1, 2009.

The report concluded that gross written premiums for the group edged up two percent to $51 billion, but it masked a wide range in performance (11 of the 18 companies posted a reduction), with acquisitions flattering some of the positive results, while falling prices and weaker terms and conditions created by increased competition reduced the appetite for business and premium income for the majority of companies which declined.

Shareholders' funds for the selected group fell 10 percent to $66 billion, as catastrophe costs, investment losses and an appreciation of the dollar all took their toll, the report said.

"The events of the third quarter and those of the fourth quarter so far have tested the resilience of the selected group of Bermudian companies," it read.

"Hurricane Ike looks to be among the top five most costly insured events and the dislocation in the investment market has seen no equal.

"While the group has emerged from the third quarter relatively unscathed, confidence in the capital markets has continued to deteriorate.

"Pricing rather than return of capital has become the most powerful tool in insurers' armoury and the belief that the soft market has ended is now widely held."