NEW YORK-The property/casualty industry's chances of maintaining pricing discipline and prolonging the hard market may be diminishing, according to industry executives and analysts.

That is in spite of looming exposures from terrorism and the failure of the industry to win any kind of relief from Congress.

Those were among the comments made within two panel discussions on the future of the property/casualty industry during the Property/Casualty Insurance Joint Industry Forum, held in New York last week. The two panels-one made up of industry analysts followed by another of insurer and reinsurer chief executive officers-covered largely the same ground.

While the losses from Sept. 11 will erode a large chunk of the commercial property/casualty industry's capital, the billions of dollars that have flowed into new Bermuda facilities and elsewhere may weaken the market's ability to keep rates high, some panelists said.

It's tough to argue that the hard market will last a long time when the companies hit hardest by Sept. 11 losses generally had more capital at renewals than they had on Sept. 10, said Alice D. Schroeder, a managing director of Morgan Stanley Dean Witter & Co. in New York.

The current cycle will be shortened because the industry's ability to attract and deploy capital is better today than it was 10 years ago, said Kenneth A. Froot, a professor of business administration at Harvard University in Cambridge, Mass.

In order for the commercial property/casualty industry to sustain its profitability, insurance executives must realize that "underwriting matters," said Michael Pritula, a director of McKinsey & Co. in New York.

Asked to predict the peak of the hard market cycle, the analyst panel was unanimous in saying that it would be sooner rather than later. In fact, Mr. Froot said, the market is already softening, having reached its peak on Jan. 1.

"I was extremely disturbed to hear others talk about shortening of the cycle," said Sax Riley, chairman of Lloyd's of London, during the subsequent CEO panel. "If price firming doesn't continue for five years, we're going to die. We have to write for an underwriting profit."

The insurance industry's main challenge going forward will be to make money, agreed Raymond Barrette, chairman and CEO of OneBeacon Insurance Group in Boston. "It's a low-return business, and we're hoping for a hard market to save us," Mr. Barrette said.

For insurers to remain profitable, underwriting discipline will be essential, Mr. Barrette said. "I think we have to be more disciplined to survive," he said.

"There is no evidence that this industry has ever been able to discipline itself," said Edmund F. Kelly, chairman and CEO of Liberty Mutual Insurance Co. in Boston. "We've destroyed far more capital through mismanagement than terrorists ever did," he said.

During the analysts' panel, Morgan Stanley's Ms. Schroeder made several suggestions she termed "extreme" on how the industry could improve its profitability.

One approach, she said, would be to eliminate state guaranty fund protection for commercial lines risks. "Why should insurers pay for their competitors' mistakes?"

Ms. Schroeder also said that insurance companies should lend more support to rating agencies' decisions. Otherwise, she warned, there will continue to be no competitive reward for maintaining a high rating. The rating agencies "should have more respect, especially from the top-rated companies," she said.

She also advocated optional federal chartering of insurers. One reason that Congress has not stepped up to help insurers with terrorism protection, she said, is that the federal government "has no skin in the game."

Congress' failure to enact terrorism insurance protection was a disappointment to participants on both panels, yet they remained pessimistic of such efforts' chances in 2002.

Ms. Schroeder said that the insurance industry needs to do a better job of making a public policy argument for federal relief from terrorism losses. Insurance premiums should not go toward covering society's risks, she said. The debate in Congress needs to be focused on public policy, not on the insurance industry's desire to cover its own losses.

"Terrorism is not an insurable event. It's an act of war and should be borne by the state," said Liberty Mutual's Mr. Kelly.

"We were disappointed that Congress did not react to the need for government relief," said David B. Mathis, chairman and CEO of Kemper Insurance Cos. in Long Grove, Ill. "As long as we have a declared war on terrorism, the risk is uninsurable and we need government assistance," he said. Without that assistance, he added, losses on certain lines of coverage, such as workers compensation, could bankrupt some insurers.

Without government relief, excluding terrorism from existing policies and writing it as a separate line will be the best way to proceed, Mr. Mathis said.

Regarding the chances of terrorism protection proposals in Congress this year, Mr. Pritula of McKinsey noted that most pundits are pessimistic. One reason for this pessimism, he said, is that "legislation by anecdote doesn't go far. We've heard stories about some economic activity not occurring, but there needs to be more evidence."

Harvard's Mr. Froot said that he believes the market has shown that it can handle the terrorism exposure without federal relief. It already is coping with the losses from Sept. 11, and it continues to attract capital, he said. Going forward, the industry would be able to underwrite what he termed "normal" terrorism risks, and would face extreme, unexpected losses only in rare circumstances.

Ms. Schroeder said that while such self-sufficiency might satisfy policyholders, it would not be of comfort to shareholders.

Sean F. Mooney, chief economist and research director for Guy Carpenter & Co. Inc. in New York, moderated the analysts' panel. Lawrence G. Brandon, professor emeritus of the American Institute for CPCU and the Insurance Institute of America in Malvern, Pa., moderated the CEO panel.