Kurt E. Karl, chief economist in Swiss Re's Economic Research and Consulting, North America, declared that the hardening insurance market "will continue until balance sheets are fixed." He expects the hardening market to last until at least 2005.

Similarly, Martin Albers stated that after several dismal years of losses and reduced profitability, the p-c insurance-reinsurance industry needs to recapitalize, and that rates must remain high to allow this to happen. Mr. Albers is a member of the Swiss Re executive board and also heads the Risk Solutions unit of the Swiss Re Financial Services Group

The global loss figure for the property-casualty insurance-reinsurance industry for 2001 was around $90 billion, and Mr. Karl said there are further losses this year on the equity side. Therefore, he expects p-c industry capacity to continue to worsen this year despite price increases.

He also noted that European p-c insurers are more involved in equity than are insurers in the U.S. This means that the equity losses in Europe this year are substantial. Since the insurance market is global, he noted, "this makes a difference for prices in the U.S."

However, this year's rate increases and tighter terms and conditions should lead to substantially improved underwriting profitability in the U.S. well into 2004, Mr. Karl said. But the real question, Mr. Karl said, is how well the equity markets perform in the coming years.

The alternative risk transfer market has benefited from current conditions, Mr. Karl and the other panelists stressed. Prices are up, and both self-retentions and captive insurance companies have increased.

There is increased interest, particular from insurance companies, in alternative risk transfer vehicles such as finite solutions for loss portfolio transfer, structured finance, and a balancing of self-retention and traditional insurance.

Interest also is up "enormously" for insurance-linked securities. "We are estimating 50 percent to 100 percent increase in catastrophe bonds this year," Mr. Karl said. In these days of defaulting corporations, credit solutions also are of increasing interest to insurers, he added.

Weather solutions--which Mr. Karl said are independent of the insurance cycle--also are seeing a rise in popularity. This is due to "new products, new lines, new ways to get coverage," Mr. Karl stated.

As a whole, the ART market today stands at between $25 billion to $30 billion, said Fernando B. Gentil, head of structured finance for the risk solutions unit. This figure has been growing over the years, he added.

Hans Zimmerman, co-head of Risk Underwriting for the Risk Solutions unit, noted that several multi-year reinsurance contracts are coming up for renewal in 2003 and 2004. For these, he said, there will be "steep increases" in price. But like his colleagues on the panel, Mr. Zimmerman stressed that much depends on how the investment markets perform during that time.