Editor's note

The year 2001 will go down in the annals of re/insurance history. The events of the year have been unprecedented; re/insurer collapses, marshmallow-soft market conditions, poor investment returns and adversely developing losses all helped push the sector towards a turn.

Then September 11 hit - the largest insured loss experienced by a market which felt it both economically and personally. As we mourned our colleagues we started counting the cost of the unbelievable tragedy, and found an industry able to shoulder the burden, in the main.

It was inevitable that a loss of this dimension - even though we are still to get a real idea as to what that dimension truly is - would take some of the industry players with it. Taisei Fire and Marine in Japan and Fortress Re in the US are most likely just the beginning of the second round of WTC-related losses.

More failures are on the cards, and withdrawals from reinsurance business such as recently seen at R&SA, Hartford and Copenhagen Re are likely to continue. But for the well-established players and the newly formed players alike, the opportunities to grab the industry and shake it to the core should not be missed.

For too long reinsurers have been wallowing in the doldrums, with the sector viewed as an unglamorous, old-fashioned industry in a rapidly-changing, technology-driven world. That has all changed. More than $20bn in new investment is pouring into the business, feeding new start-ups in Bermuda, recapitalizing international reinsurers and filling the coffers of Lloyd's syndicates.

Despite 2001 being an unusually bad loss year - asbestos-related losses deteriorating badly, foot and mouth in Europe, mould claims in the US - and despite warnings of bad results in the pipeline when the year is finally closed, overall the industry is proving a siren-like lure to the investment community. "We continue to believe there are high-quality, attractively priced investment opportunities in stocks with near-term earnings visibility," commented analysts at ABN AMRO in a recent briefing report.

Deborah Pretty of Oxford Metrica noted that the impact of the WTC loss on shareholder value of re/insurance companies shows distinct trends. "Firstly, there appears to be the group of distinct recoverers made up of the AAA-rated insurers and the Bermudian insurers. This group has not only recovered pre-September 11 levels but additional value has been attributed to the. Secondly, the Lloyd's insurers appear to be struggling to recover lost value and finally, the other insurers appear to have more or less recovered" within three months of the catastrophe.

She has identified four "super-recoverers", AIG, Ace, Swiss Re and XL Capital, all of whom have emerged from the event with a significantly enhanced reputation. This has allowed them to raised more capital to embark on new ventures or beef up their current operations to take advantage of the opportunities now around that possibly will never happen again.

And even though Ms Pretty has identified Lloyd's insurers are "struggling", the market has still managed to up its capacity to a record level of £12.3bn for 2002, an increase of £1.3bn on its 2001 capacity level. As agencies set up non-Lloyd's re/insurance operations and boost the capital in their Lloyd's syndicates, it would appear the market is taking as much advantage as its competitors of the current conditions. This is, indeed, a turning point.