As years go, 2002 is likely to be seen as a watershed in the re/insurance industry's history. This time last year, reports were coming through of deductibles rising from $500,000 to $50m in some cases, and rate increases in the hundreds of percents in certain lines of business. Even so, by the time the programmes were completed, there were still doubts voiced in certain quarters that the hardening conditions still were insufficient.

Even now, opinions differ about the effect of the new capital into the market post-9/11. With about $30bn new capacity, there is criticism in some quarters that this has dampened the market recovery. Others point out that the cash sum in is paltry compared with the $100bn or more that has exited through WTC-related losses, capacity withdrawals, re/insurer failures and deteriorating long-tail liability claims.

Speaking not long after late October's Baden Baden meeting, Ross McKenzie, chairman of Aon Re International, felt there was a strong message from the continental reinsurers that there would be continued price increases and technical wording restrictions. "Long-tail business is getting more attention this year," he said, "and it is far more technical." This has manifested itself in underwriters demanding and analysing more data. "There is a need to explain the cedants' business plan in greater detail to win the support of professional reinsurers."

On the property catastrophe side, there is some anecdotal evidence that rates may have plateaued for certain risks, though there remains a capacity issue for certain large property cat exposures. Indeed, looking through the list of the largest natural catastrophes over the course of this year, economic losses have hit the $60bn mark, with insured losses estimated around $10bn (see figure 1). The largest loss is August's central European floods, which proved an additional unwelcome burden to some of the already creaking continental European reinsurers.

Piled on top of this, however, is the increasing weight of liability business. This issue of Global Reinsurance contains a roundtable addressing the problems of US directors' and officers' business, which has now reached crisis point. But these problems are not limited to the US; rates for employers' liability cover elsewhere have soared so high that many businesses are saying they may be forced to shut.

In the aviation sector - a business that has made losses in ten of the past 13 years - direct rates are beginning to soften, according to a study recently issued by Benfield Greig. Reinsurance rates have held steady at last year's levels, partly because the failure of Fortress Re pulled $500m from the market.

So as the year draws to a close, the market is still reshaping. In one sense, it is a testament to the strength of the re/insurance industry that it has managed to continue trading in the wake of the terrorism attacks in the US, and the subsequent turmoil in the global economy. But the year ahead is likely to bring an equal number of challenges, with uncertainty the watchword for the future.