U.S. property/casualty insurers are less likely to release large amounts of reserves as they have in recent years as underlying business conditions deteriorate, Standard & Poor’s Corp. said in an analysis released Thursday.

Property/casualty insurers released large amounts of reserves in recent years, S&P analysts said. However, weak economic recovery prospects and consumer confidence, high unemployment and a prolonged soft underwriting cycle will make it difficult for U.S. insurers to maintain that trend, S&P said.

In an article, “Why U.S. Property/Casualty Insurers Might Have to Put the Brakes on Reserve Releases,” S&P said insurers’ operating profit has weakened due to declining payrolls, sales of insurance products, reduced investment income, soft insurance pricing and excess capacity.

Analysts said they suspect that some property/casualty insurers will revise prior-year reserve estimates upward, particularly those with long-tail lines.

“If we find that a P/C insurer’s required reserves are inadequate, we might adjust the company’s reserve adequacy, earnings or capital adequacy,” Siddhartha Ghosh, New York-based S&P credit analyst, said in a statement. “In some cases, this could, based on materiality, result in ratings actions.”

According to S&P, property/casualty insurers’ prior-year reserve releases through year-end 2008 totaled $64 billion from business underwritten for accident years 2002 to through 2007. During this period, S&P said companies released the largest amount of reserves from accident years 2003, 2004 and 2005, totaling $59.2 billion, or 93% of the reserve releases for the period.

S&P said its outlook on reserve adequacy for the property/casualty industry remains in limbo. It depends on how long the soft cycle lasts and on an individual insurer’s “effectiveness in using the various risk controls and tools that they developed under their (enterprise risk management) frameworks,” which S&P analysts said “could mitigate some of these potential future adverse reserve developments.”