Insurance’s catastrophic year impels it onto banks’ terrain

The insurance industry is at a turning point. In the wake of the September 11 attacks, capacity shrank, rates rocketed, and losses mounted. Some cover is still hard to come by. Yet a dramatic resurgence is under way as new capital floods in and as insurers adopt alternative risk transfer, dubbed insurance-based investment banking. It's now evident that the terrorist crisis has not simply served to highlight the notoriously cyclical nature of the industry but has greatly accelerated long-term changes in the sector. So what role will the capital markets play in providing capacity? And how will the latest and largest calamity hasten the convergence between the distinct cultures of insurance and banking?