While a traditional hard market remains elusive, U.S. commercial insurance rates are expected to continue firming in many lines of business and industry sectors in 2013, a report released on Wednesday by Marsh Inc., a unit of New York-based Marsh & McLennan Cos. Inc. finds.

The report, “U.S. Insurance Market Report 2013,” noted that the “price increases are not uniform, capacity is plentiful, and competition among insurers remains intense.”

One mitigating factor for 2013 will be the impact of Superstorm Sandy. Marsh said losses attributable to the storm likely will temper what had been a generally improving rate environment for property insurance buyers in late 2012 by causing underwriters to seek higher rates and tighter terms and conditions in catastrophe-exposed areas.

“Although Superstorm Sandy will rank as one of the costliest storms in U.S. history, it is not forcing a rapid hardening of the overall market as insurers' capital positions were strong enough to weather the storm,” David Bidmead, Marsh's U.S. CEO said in a statement. “But the storm has prompted underwriters to seek clarification of certain definitions and other language in property policies.”

In addition to the specter of above-average losses, receding reserve releases will put pressure on balance sheets and force underwriters to maintain underwriting discipline, the report states.

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“Insurer results are likely to be affected in 2013 and beyond by the continued decline in the pace of reserve releases,” the report states. “Although reserve releases continue to support earnings to some degree, reserve redundancies are gradually shrinking and some insurers reported higher levels of adverse development in the third quarter of 2012.”

The ongoing turmoil in world capital markets and resulting inconsistent investment returns also will pressure the industry, Marsh said. “Despite the overall turnaround in investment performance in recent years, the P/C industry faces near-term investment challenges as historically low interest rates continue to produce lower yields,” the report states. “Because investment income remains a major component of profitability for insurers, increased pressure falls on underwriting profitability.”

Copies of the report are available here.