NEW YORK—Insurance company CEOs predicted a rocky 2012 for the industry this week during a panel discussion at Business Insurance's 2011 Women to Watch conference in New York.

Volatility among economic indexes, unprecedented natural catastrophe losses and uncertainty over regulatory reforms all conspired to make 2011 a challenging year for the insurance industry from an underwriting and cost control perspective, the panelists said.

“Unfortunately, I think 2012 shapes up to be even tougher,” said Mike Kerner, CEO of Zurich North America.

In the new year, much of the industry's success will depend on how it responds not only to ongoing economic hardships, but emerging commercial risks such as catastrophic property damage and supply chain disruption, regulatory scrutiny and worsening national health care costs, panelists said. That response, Mr. Kerner said, likely will need to include some form of premium increase on multiple lines of insurance.

“As we go into 2012, we do realize that we need to see some fundamental changes in the way we price some of our products in order to get ourselves to a level of profitability that's acceptable from a return-on-capital standpoint,” Mr. Kerner said.

Panelists said business owners should expect to see at least some premium and renewal rates rise for coverage of catastrophe-exposed property, primary and excess workers compensation and some excess casualty lines. However, Platinum Underwriters Reinsurance Inc. CEO Elizabeth Mitchell said predictions of a sweeping hardening of the commercial insurance marketplace are likely overstated.

“We haven't seen all that much improvement on pricing, except on business lines that have had a particularly high rate of activity,” Ms. Mitchell said. “There are spots where you're going to get some targeted action, and I think you're likely to see more of that than you are broader, more dramatic changes.”

Measured, tactical changes in pricing most likely would be “quite good for the industry, but the challenge there is that you have to be able to explain that to your audience,” Mr. Kerner said. “As an industry, we haven't had to do that for quite a number of years, and it's something that's going to be a challenge for us.”

In the workers compensation sector, PMSI Inc. CEO Eileen Auen said underwriters and brokers are still waiting for clarification as to how health care reform will change their strategic planning. In the meantime, she said, sagging employment numbers and steadily worsening national health trends are likely to make life for workers comp insurers at least as difficult in 2012 as it has been in 2011.

“Demographic trends in obesity and aging—all of those things continue to put a relentless strain on medical costs, and there's really no end in sight on that,” Ms. Auen said.

Other issues likely to impact insurers' profitability in 2012 will be lower returns on investment capital and a tapering of prior-year development, panelists said.

“We can more or less be assured that the benefits that we've seen from prior-year development, held over from when the market was a bit firmer, will begin to tail off next year,” Mr. Kerner said.

Despite the challenges facing the insurance industry, panelists predicted the market will not suffer the dramatic reduction in capital it experienced in some previous economic rebounds.

Ms. Mitchell said consolidation in the industry likely will be held, largely because company valuations—bedeviled by the sagging economy—have yet to rebound.

“Most P/C insurers are sitting at or below book value, which makes the cost of an acquisition very expensive,” Ms. Mitchell said. “Until valuations pop back up, I think consolidations are going to be very difficult.”