Not since 2001 has the date of one of the biggest events on theE&S/specialty lines market calendar coincided with what may bea turning point for the market and the property-casualty insuranceindustry overall.

The timing in both years, however, was coincidental.

As was the case in 2001, activities taking place at the annualconference of the National Association of Professional SurplusLines Offices, Ltd. were not what made the date of the event thedividing point of any description of this year in insurance.

In 2001, the NAPSLO convention, which had been set for Sept. 12,was postponed because of the tragic events of 9/11. The pace ofhardening market conditions accelerated quickly after the datepassed.

This year, no one was predicting a turn to a hard market untillate 2009 at best, as NU wrapped the last of more than three dozeninterviews with broker and insurance executives at NAPSLO in SanDiego on the same Sept. 12 date.

Commenting mainly on predictable topics we routinely reported onin this newsletter during the prior eight months–strategies forsurviving a soft market, merger activity, new product development,and the impact of an economic downturn on their businesses–the onlypotential wild card seemed to be Hurricane Ike, which headed forTexas that evening.

Even the few executives who turned their attention from JimCantore's forecasts on The Weather Channel playing in the hotellobbies to check financial and insurance online news services ontheir handheld Internet devices, would have little clue aboutweekend events in New York that would rewrite the history of thisyear's events as pre-NAPSLO and post-NAPSLO–or more correctly,pre-AIG bailout and post-bailout.

“AIG Considers Emergency Funding Options, With Rating DowngradeLooming,” the NU Online News Service reported early the followingMonday morning, detailing efforts to secure a multibillion-dollaremergency loan from the Federal Reserve to avoid a devastatingratings downgrade.

Two days later, the Fed came through, with our daily newsservice reporting that the U.S. government would take a 79.9percent stake in AIG in exchange for the Federal Reserve Bank ofNew York providing up to $85 billion in emergency financing tostave off a bankruptcy filing at the parent company of surpluslines leaders Lexington Insurance, American International SpecialtyLines Insurance company and the admitted specialty divisions of thedomestic brokerage group.

The rest of the details of additional financial support,executive and personnel changes, and looming asset sales are stillbeing written daily by reporters for our online news service andweekly in the pages of NU magazine, where Editor-In-Chief SamFriedman has chosen the AIG tale as the No. 1 insurance story ofthe year on a list published in today's magazine print edition,also available online atwww.propertyandcasualtyinsurancenews.com.

Even though our monthly e-newsletter isn't packed with the samebreaking news headlines as sister publications, the AIG crisisranks as No. 1 here, too, with our September and October featureson actions of brokers and competitors responding to client concernsedging out previous contenders for the top spot–the continued softmarket, and even the subprime meltdown that was the catalyst forAIG reversal of fortunes.

While the E&S/Specialty Lines Extra list of top-10 stories,like Sam's list for NU magazine, is entirely subjective, AIG'scommanding position in the two surplus lines and specialtyinsurance markets made the drama on Pine Street the clear top-storychoice. Our post-bailout articles have already begun to reflect theuncertainty of what lies ahead.

“At the [NAPSLO] meeting, which took place before Hurricane Ikehit the Texas coast and before Hurricane AIG shook the financialmarkets, members…viewed competition and an economic slowdown astheir biggest headaches for the year up to that point,” we wrote ina post-bailout article about market challenges, unsure whether newsof AIG's mounting problems would have significantly changed thecomments of executives interviewed the week before the governmenttook charge of AIG.

Likewise, we parenthetically noted that interviews aboutcontinuing softness in the medical malpractice market werepre-crisis, not knowing whether AIG's leading market share of about7 percent on a claims-made might fall, or what the change wouldmean for the overall market.

In other areas, AIG's market dominance is even more evident.

“AIG and Lloyd's are far and away the largest E&S writers,accounting for 39 percent of the premiums written for the E&Ssegment as a whole, with premiums of $8.3 billion and $6.4 billion,respectively,” we noted in a footnote to an article by A.M. Bestanalyst David Blades about a financial analysis of the surpluslines market that he put together for NAPSLO.

More recent articles about the directors and officers liabilitymarket–where AIG commands 19 percent of the primary market and 12percent of the excess market, according to the latest figurespublished by Towers Perrin–highlight the uncertainty that continuedeven two months after the bailout.

As professional liability brokers headed back out to Californiafor another big specialty lines event last month–the ProfessionalLiability Underwriting Society International Conference–theyoffered differing views on the impacts of AIG's turmoil and thesubprime crisis on conditions in the D&O market.

“Do you know how it gets really, really quiet right before ahurricane hits? That's where we are right now,” said one brokerageexecutive, Peter Taffae, managing director of ExecutivePerils–predicting a Jan. 1 market turn for D&O.

Others, like Lockton's Rodger Laurite, pointed to the tremendousamount of alternative capacity available, suggesting thatcompetition could keep prices soft for some time.

Is AIG undercutting competitors' prices to hold on to marketshare? Are competitors charging more to compensate them for theirhigher financial strength ratings?

We've just begun reporting experts' answers to questions aboutthe market impact of AIG's struggles in E&S/Specialty LinesExtra.

Will AIG remain the largest U.S. surplus lines insurer and thedominant player in individual specialty lines like managementliability and aviation in 2009? Stay tuned.

Below, we provide the complete list of our top-10 storiesimpacting the surplus lines and specialty insurance markets:

#1–Troubles Impacting Largest E&S Carrier Prompt Broker,Carrier Reactions

#2–Subprime Fallout; Claims Mounting

#3–This Space Is Getting Crowded: Standard MarketInnovations/Bermuda Competitors

#4–E&S Execs Reveal Soft Market Strategies

#5–M&A Deals Rise In Specialty Sector

#6–Would You Believe Claims-Dispute Insurance?

#7–D&O Excess Coverage Battles Heat Up

#8–Hot Lines Can Burn Insurers–Check Out Medi-Spas

#9–Specialty Carriers Seek Gems Among Program BusinessRiches

#10–Who Are We Anyway? Associations Tackle RebrandingInitiatives

The remaining articles in our last 2008 edition ofE&S/Specialty Lines Extra detail the No. 2-to-No. 10 choices onour list.

In the first few articles, we recount the top-five, which arestories that impacted the broader property-casualty market as wellas the surplus lines market.

While articles published in our e-newsletter have a differentemphasis, reflecting our desire to deliver information on theimpact to the specialty market, this half of the list bears astrong resemblance to the one published in NU magazine today. (Seerelated article for that list.)

Next, we describe the bottom-five–a group of stories that areprobably more relevant to participants in the specialty segmentthan the broader market.

Our final article includes some afterthoughts on the lessons of2008.