Solid evidence of a substantial and sustained rebound in profitability for property/casualty insurers in the wake of the financial crisis that began in mid-2007 has emerged in the first nine month 2009 results just released by ISO and the Property Casualty Insurers Association of America. The industry reported an annualized statutory rate of return on average surplus of 4.5 percent through the first nine months of 2009, up sharply from 1.1 percent during the same period in 2008. In his commentary on the results, I.I.I. president Dr. Robert Hartwig noted that as recently as the first quarter of 2009 the industry recorded a negative rate of return. Moreover, stable investment market conditions and modest catastrophe losses since the end of the third quarter through late December guarantee that full-year profitability in 2009 will be much higher than the 0.5 percent return recorded in 2008. In another sign of recovery capacity in the industry (as measured by policyholderÃ¢â‚¬â„¢s surplus) rebounded for the second consecutive quarter after two years of decline. PolicyholderÃ¢â‚¬â„¢s surplus increased by $27.8 billion to $490.8 billion or 6.0 percent during the quarter, up from $463.0 billion at the end of the second quarter. Hartwig observes that the reversal is notable and important given that P/C insurance industry capacity had plunged by an alarming $84.7 billion or 16.2 percent over the previous five quarters from the pre-crisis peak of $521.8 billion at the end of the second quarter of 2007. The recovery of asset markets, while welcome, is a leading indicator of economic recovery and does nothing to salve the impact of the ongoing six-year-old soft market as well as a significant reduction in demand for insurance driven by a deep global recession. Ã¢â‚¬Å“The weak pricing environment and the sharpest contraction in the economy since 1982 sent net written premiums tumbling by 4.5 percent, despite a long awaited return to economic growth,Ã¢â‚¬ Hartwig notes. While insurers remain cautious about the economy and financial market conditions, there is guarded optimism that both will continue to improve as the industry moves into 2010, he adds.