At Swiss Re’s annual yearend insurance industry review, speakers noted that while the global recession was likely to last well into next year, the insurance industry is on the road to recovery since September 11. “The U.S. and global economies are in a recession and it is likely to last at least through mid-2002,” says Kurt Karl, chief economist for Swiss Re’s economic research and consulting arm. He adds that falling oil prices, mortgage financing and falling inflation should lead to a rebound in consumer confidence later in 2002. Interest rates will likely drop again, but will start to rise in mid-2002, as the economy strengthens, notes Albert Papa, vice president at Swiss Re Asset Management. “Credit fundamentals and corporate profitability may remain weak to early 2002.” This will make credit selection a key, he says. Senior economist Thomas Holzheu was among those expressing optimism that the insurance industry is set for a turnaround following the declining results of the past few years. “Demand is up for property, operational risk, aviation coverage, among others. Prices are up by at least 10 percent, valuations have recovered, and the market will recover in 2002.” Speakers also agreed that while rates were on the rise prior to the September 11 terrorist attacks in the U.S., the largest insurance loss on record, the market hardening and tightening of terms were bolstered. “There is no doubt that the context in which we do our business has drastically changed since that Tuesday morning in September,” says Swiss Reinsurance America chairman Andreas Beerli. With the turnaround, expect insurance stocks to gain popularity. Alan Zimmermann director of research at Fox-Pitt Kelton notes that, “financial stocks have outperformed in previous economic recoveries for both p&c and life” With demand for insurance increasing post-September 11, and capacity reduced, the coming year bodes well for the industry.