Insuring Projects After September 11

Abstract

After years of a “soft” cycle, when the insurance marketplace was driven by an oversupply of capital and a surging stock market, that market began to harden at the end of 2000. The impact was felt most in specialized sectors of the industry with capacity concentrated in a handful of primary insurers and reinsurers. The energy-related sector was particularly affected. The events of September 11 exacerbated an already difficult insurance market. The combination of reduced capacity, underwriter defections, and shock losses from September 11 has created one of the most difficult insurance markets in history. However, the market traditionally has been cyclical, with changes from soft to hard cycles every three to five years. At some point, investors seeking higher returns will invest additional capital in the insurance market and the cycle toward a softening market will begin again.