Up Underwriting Tempo Reinsurers Told

"Terrorism is a work in progress. We must maintain a focus on it as it evolves," he said.

Industry estimates put Sept. 11 losses at roughly $50 billion. Mr. Lescault said that terrorism was neither underwritten or priced for.

Underwriting is evolving, he added, moving from excluding coverage to reaching an exposure assessment.

For example, he said, such an evaluation might involve whether and how to reinsure a structure such as the Sears Tower compared with a suburban shoe store business.

Citing sources including Morgan Stanley and IBNR weekly, Mr. Lescault added that there is an estimated loss of $103 billion in capital with new capacity of just $31 billion planned for 2002. Of that total, he said $20 billion would be accessed through the Bermuda market and an estimated $10 billion would be raised industrywide.

The $103 billion capital loss includes $50 billion from the World Trade Center catastrophe and $53 billion from a drop in stock and bond values, he said.

Mr. Lescault noted that going forward, markets will not generate the investment income that they have in the last decade and, consequently, underwriting results need to be stronger.

Swiss Re estimates suggest that January 2002 renewal rate increases were as follows:

?Commercial lines primary insurance for property non-cat, 10 percent; for property-cat, 5-20 percent; for liability, 10-40 percent; auto, 10-20 percent; and workers' comp, 10-15 percent.

?Non-proportional treaty reinsurance for property-non-cat, 10 percent; property-cat, 15-30 percent; liability, 5-20 percent; auto, 15 percent; workers' comp, 15-25 percent.

Better underwriting will be important going forward, Mr. Lescault stated. January renewals accounted for "tough action" on problem classes including directors and officers liability insurance, errors and omissions coverage, and health care coverage that did not meet underwriting standards, he added.

Emerging risk was also considered. Management of the world's water supply was reviewed by Thomas Streiff, head of Swiss Re Group's sustainability management.

Growing populations, excessive usage and misuse of the world's water are creating the need for better water management, Mr. Streiff said.

There will be a need for risk management, as water supply and sanitation systems age, he added.

And as water shifts from a public commodity to a privatized commercial good, the issue of liability associated with polluted water will increase, Mr. Streiff said.

More than 40 percent of drinking water in North America currently does not meet established criteria for good drinking, he added.

The life reinsurance business, while impacted by the World Trade Center event, stands to benefit from improving mortality trends, according to Jacques Dubois, chairman and chief executive officer of Swiss Re's Life & Health America Holding Corp.

Better medical research has paid off with an increase in life expectancy that now stands at 76.5 years on average, he said.

Cession rates, the rates of life insurance contracts ceded to reinsurers, are also increasing, said Mr.Dubois.

Cession rates increased to 64 percent in 2000 up from 15 percent in 1993, he added. In 2001, the cession rate will probably be around 70 percent, he continued. Ultimately, it could reach a maturation point of 80 percent, Mr. Dubois said.

In 2001, between $4.5 and 5 trillion in insurance was ceded to reinsurers compared with approximately $4 trillion in 2000 and $1.1 trillion in 1993, according to Mr. Dubois.

In a separate announcement, Swiss Re Life & Health North America announced that it moved its corporate headquarters from Stamford, Conn., to Armonk, N.Y. The Armonk facility is also headquarters to Swiss Re's Americas Division, the property and casualty business for North, Central and South America. The move involved slightly more than 200 people.