Millions of words have been written by people more able than I to express the shock, disbelief, then grief which swamped much of the world following the terrorist attacks in the US. As the incomprehensible events unfurled before our eyes, the horror of the terrible scenario led swiftly to the realisation that the world would never be the same again. We had all become slightly harder, slightly more cynical, slightly less trusting – had lost yet more of that already scant supply of naivety within us.
For the re/insurance industry it hit even harder home. Our colleagues, competitors and friends worked in those towers and were sitting on those planes. Questions of who and why preceded those of how much. Even so, the gathering of reinsurers in Monte Carlo, meeting for the annual Rendez-Vous de Septembre, had no choice but to look at how they could start dealing with what inevitably was destined to become the largest catastrophe in the industry's history.
Over the following days and weeks estimates were issued by both primary insurers and reinsurers, and the industry has rallied its forces to try to deal with the loss. Initial figures almost inevitably fell on the low side, and the first indications of a $10bn or so industry-wide loss has risen over the weeks to up to $70bn. It will take years for the true extent of the cost to the industry in cash terms to be known. In particular, the liability exposures – and more specifically business interruption coverages – will be a long time in the reckoning. In this issue of Global Reinsurance, we have compiled an extensive table of the known losses to date. These figures are not accurate – there are double counts across the industry, certain businesses have reported post- rather than pre-tax losses, others are still keeping their potential exposure positions very firmly to their chests – but they do give an indication of the extent to which the losses are spread over the international industry. All the major markets – Europe, Bermuda, US and the Far East – have been impacted by the losses, reflecting the truly global nature of the reinsurance business.
As for the future shape of the industry, the extent to which the events of 11 September have changed the re/insurance business is still a long way from being understood. The repercussions from those events have been heard not just in the US, but around the world; not just in aviation and property cover, but in all lines of business.
Even before those four planes were hijacked and dashed to oblivion, reinsurers were talking of rate increases over the next renewal. The pain of recent low rates, generous terms and poorly performing investment portfolios was beginning to really knaw. And for certain companies, the threat of spiralling asbestos liabilities was proving a major worry. There was no choice, they said, but to increase rates this renewal season, to get back to the central business focus of underwriting for profit rather than for cash flow. How these losses finally affect the year-end renewals waits to be seen.
On a lighter note, I am delighted to be able to publish the winning paper in this first year of the Lumina Awards, and to have this opportunity to thank all the entrants, judges and supporting organisations for their participation in this inaugural year. The Lumina judges identified some thought-provoking and challenging entries in each category, though they did not shirk in deciding to withhold a category winner if they deemed no individual submission was worthy of the title. I would like to personally thank each of the judges, drawn from both academia and the highest echelons of industry, for all their work and effort in identifying not just the best papers in each category, but also the overall winner of the Lumina Award for 2001.
In particular, Patrick M. Liedtke, Secretary General and Managing Director of The Geneva Association, and Thierry Auger, Vice President of Assurances Génèrales de France and Corporate Secretary of the organising committee of Les Rendez-Vous de Septembre, have provided invaluable support to this year's awards, and I would like to extend my gratitude for all their help and advice.
Global Reinsurance initiated this competition to raise the profile of the wide-ranging research undertaken in the risk arena. Up until now, very few items of research have reached the broader risk community. I hope through these awards that the links between the re/insurance industry and academia, and the contribution of research carried out within the industry itself, will be recognised by a greater audience.
Recent events mean the world is a riskier place than ever. Next year's awards will no doubt recognise that change, and I encourage you to look at the second Lumina Awards as an opportunity to identify the way you see the risk world changing and convey your vision to a wider audience.
Sarah Goddard is the editor, Global Reinsurance.