It might seem odd to pick a non-event as the most important story of 2006, but after two consecutive years of being hammered by record hurricane losses, property-casualty insurers are more than grateful for the reprieve they received this past season.

Last year at this time, three storms severe enough to make the worst-10 losses of all timeHurricanes Katrina, Rita and Wilmahad combined to drain some $45.2 billion from carrier coffers. In fact, Katrinaat a total insured loss of some $35 billionwas by far the worst single event of all time.

All this came on top of 2004s grand slam of hurricane losses, when four major storms hit the U.S. mainland in just 90 days, leaving behind at least $20 billion in insured claims.

The double-whammy of 2004 and 2005 drew billions of new capital into the property-catastrophe marketmuch of it via Bermudaas investors sought to cash in on soaring prices for coverage in disaster-prone regions. However, existing players with heavy cat exposuresmost prominently Allstatebegan to retrench to keep their worst-case scenarios under control.

The massive storm losses also put pressure on public policymakers to ease coverage scarcity and consider longer-term solutions, one of which–the idea of a national catastrophe fund to back up private carriers–split the industry politically.

Meanwhile, underwriters held their breath, bracing themselves for another catastrophic seasonbut the sun kept shining, much to the delight of the industry and its investors, as profits soared.

Indeed, while they say every cloud has a silver lining, in this case, every sunny day may in fact have a stormy future, as insurers are likely to come under fire from legislators, regulators and consumer advocates for sky-high property premiums coastal states.

The lack of catastrophes this year will create its own set of problems, including accusations that we cried wolf when we raised rates and are now price-gouging, warned Edmund Kelly, CEO of Liberty Mutual, during his recent keynote address at the 18th Annual Executive Conference for the Property-Casualty Industry, co-sponsored by NUs parent company.

Industry leaders emphasize, however, that critics with 20-20 hindsight dont understand pricing must be risk-based, and that after two years of record disaster losses and rising reinsurance costs, premiums had to be hiked substantially.

Its like saying someone who survives Russian roulette faced no risk just because the gun didnt go off, joked Mr. Kelly, when we all know there is still a bullet in the chamber, and if you play the cat game long enough, its going to go off.

Indeed, 2006 marked the 100th anniversary of another massive catastrophethe 1906 San Francisco earthquake. Insurers argue that the next Big Onewhether it will involve the ground shaking, the wind blowing or terrorists striking once again–could come at any moment.

Catastrophe modelers toughened their standards and raised the bar for probable-maximum-losses, while insurance rating agencies pressed carriers on their preparation for disaster risks.

But when push comes to shove, this year proved that while it might not be nice to fool Mother Nature, in fact, Mother Nature has no qualms about fooling mankindfor better for worse.

Special Reports /

NU's Top 10, #1: Mother Nature Gives Insurers A Break!

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