In 2001, man-made catastrophes cost insurers more than natural disasters, mainly due to the back of September 11 losses, says the latest sigma study released by Swiss Re. The study pegs losses for the terrorist attacks at US$19 billion for property and business interruption, and US$16.5-39 billion for life and liability. Overall, the study confirms earlier estimates of US$30-58 million in losses. This dwarfs the next highest loss event, Tropical Storm Allison, which caused flooding in several U.S. states last June and cost insurers about US$3.2 billion. The closest man-made catastrophe was an explosion that tore through a fertilizer factory in Toulouse, France last September, costing insurers US$1.4 billion. September 11 was not, however, the costliest in terms of lives lost, being shadowed by the earthquake that shook Gujarat, on the border of India and Pakistan in January, 2001. An estimated 15,500 people were killed by the quake, which registered magnitudes as high as 7.7. The final estimate of September 11 fatalities is about 3,000. Overall, man-made and natural catastrophes claimed over 33,000 lives worldwide and resulted in US$34.4 billion in property and business interruption insurance losses. Notwithstanding September 11, 2001 was shaping up to be an average year for catastrophes, the study suggests. But the attacks have thrown the industry’s understanding of catastrophic risk into question. “The traditional insurability criteria – quantifiability, randomness, diversifiability, risk-adequate pricing and conditions – are not satisfied in the current situation [i.e. terrorism risks].” The study reaffirms an earlier Swiss Re report that says there must be two approaches to the issue: state-sponsored terrorism coverage and mandatory direct insurance. “This could take the form of a combination of state and private insurance resources for a transition period, until the insurance industry has accumulated the necessary insurance capacity to cover limited terrorism risks,” the sigma report suggests. However, understanding natural catastrophes will remain the biggest issue for insurers over the long-term, as higher population densities and higher concentrations of insured values add to the severity of losses.