ATLANTA — The rate increases witnessed across certain sectors of the excess and surplus lines business likely will not be sustainable in the long term, said attendees of the National Association of Professional Surplus Lines Offices Ltd. annual convention Oct. 8-11 in Atlanta.

“We saw 10% to 15% price increases early in the year due to restricted capacity as people began to recalibrate their portfolios and readjust how they view their catastrophe exposure,” said Michael J. Carr, Atlanta-based senior vice president of excess and surplus property for Liberty International Underwriters. “However, what we saw at the end of six months is that prices stabilized.”

Gene Hinman, executive vice president of London-based Pioneer Underwriting Ltd., said that while he has seen 5% to 10% increases in E&S rates for the year to date, the rises have occurred primarily on the property side and were dependent on other variables such as geography. “There really isn't as much a market as much as there is a collection of micro markets,” he said.

Alan Jay Kaufman, chairman, president and CEO of Farmington Hills, Mich.-based wholesale broker and underwriting manager Burns & Wilcox, said that while the overall business climate is up slightly for the year from the vantage point of insurance companies, much trepidation remains about the direction of the market.

“I think people over-anticipated in 2011 that 2012 was going to be a much stronger year,” Mr. Kaufman said. “The good news is that business has not gone down.”

Judith A. Patterson, Boston-based head of E&S property for Beazley P.L.C., agreed the market for catastrophe-exposed property in 2012 has not hardened as many expected, and that increases seen over the past six months were insufficient to help insurers recover from the prolonged soft market that preceded the rising rates.

“When this market first started improving, a lot of prognosticators thought that this was going to be a slow, steady and sustainable upswing,” she said. “But there's just so much capital in the market that I now hope that we don't swing into the negative.”

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“We are still able to manage an increase, but the percentage of increase has begun to come back down,” Ms. Patterson added. “So it is pretty apparent that without some sort of event we are going to be flat by the end of the year.”

Likewise, Ben Walter, CEO of New York-based Hiscox USA, said the speed with which capital can enter the market is likely to dampen rate increases going forward.

“You do have a lot of capacity, and the market is more efficient than ever before,” he said. “Market can flow in and flow out of the insurance markets with an efficiency that it never could before. It's been that way in the capital markets for a long time, and insurance is just now catching up to that.”

Christopher M. Treanor, president of New York-based underwriting manager and wholesale insurance brokerage Preferred Concepts L.L.C., agreed that the excess of capital in the market made the prospect of long-term rising rates unlikely.

“The market is flat to slightly up,” he said. “I don't think we'll see the broad market turn we've seen in the past, because capital flows in and out of the market much too quickly for the market to swing like it used to.”

Clifton Hope, Atlanta-based executive vice president and chief property underwriter, U.S. property for Aspen Insurance Holdings Ltd., said the abundance of capital “makes underwriters cringe” because they know their marketplace will remain “super competitive.” Mr. Hope said standard lines insurers that normally don't penetrate deeply into the E&S arena or that previously had a small footprint are now expanding into the space, expanding capacity and putting pressure on existing market participants.

“There's a feeling that the market will start to swing back from the slight firming we saw in 2011,” Mr. Hope said. “The market has evolved in such a way that firming markets can be exceptionally brief, six months, or if you are lucky, nine, so underwriters are preparing for what the evidence would suggest is a likely slow-down in rating momentum.”