Ninety-one percent of industry leaders responding to a survey at the meeting predicted that the hardening of the commercial p-c market will continue through 2002, while 79 percent said the same about personal lines.

The expected rise in rates and tightening of coverage terms and conditions will boost industry profitability this year, the respondents added. Eighty-nine percent said they expect a declining combined ratio for 2002. Ninety percent predicted higher profits in commercial lines (excluding workers' compensation, for which only 65 percent expect better results).

However, a panel of analysts speaking at the forum said that with capital rapidly flowing back into the industry to take advantage of higher pricing, the hard market is likely to be short-lived.

"The capital markets raised $24 billion in 10 weeks, which is breathtaking," said Alice Schroeder, managing director of Morgan Stanley in New York. "In addition, many companies that were hit hard [by terrorist attack claims] on 9/11 entered the 1/1 renewal season with at least as much, if not more capital than they had on 9/10. There's plenty of capacity out there."

Kenneth Froot, professor of business administration at Harvard University in Boston, agreed that the "p-c cycle will be shortened in a dramatic way because capital moves in more quickly today." He added that insurers are able to "deploy capital in a much more intelligent way" because of major improvements in the "software--the people with expertise" running the "hardware--the companies themselves."

This was grim news indeed for a second panel of industry chief executives.

"I am extremely disturbed by talk of a shortening of the cycle," said Sax Riley, chairman of Lloyd's of London. "If the industry doesn't write at a profit in the next five years, it's going to die. Even if we don't have another terrorism event, we will certainly have some sort of catastrophe" that would test the solvency of many major carriers, he added.

Although most insurers are diligently tightening standards and raising prices, the industry panelists were pessimistic about the ability and even willingness of most insurers to maintain underwriting discipline for long.

"This industry is like an alcoholic waiting for its next drink," said Ed Kelly, chairman, president and CEO of Liberty Mutual in Boston. He added that "insurers have destroyed much more capital via mismanagement than terrorists did on 9/11." While he said, "I wish I could be optimistic that things will change," he lamented that "this industry has never shown that it could sustain any underwriting discipline."

Herman Arends, chairman and CEO of Auto-Owners Insurance Company in Lansing, Mich., agreed that "less successful carriers will throw underwriting discipline out the window as they have in the past."

However, David Mathis, chairman and CEO of Kemper Insurance in Long Grove, Ill., noted that "not every company had poor results in soft markets. Some have shown discipline, and it has paid off." Mr. Riley agreed, pointing out that at Lloyd's, "50 percent of our losses are caused by the bottom quartile of our syndicates."

If a catastrophe hits this year, however--especially another major terrorist attack--all bets are off, particularly since Congress failed to put a federal reinsurance backstop in place, speakers on both panels warned.

"The industry cannot manage terrorism exposure alone," said Ms. Schroeder from Morgan Stanley. "Even another single event could bankrupt companies."

She also cautioned that the risk of terrorism will always loom over the country and the insurance industry.

"These people are patient," she said, referring to terrorists. "The perception is that the longer we go without an event, the safer we are, when the opposite is true. The longer we go, the less vigilant we become, the more vulnerable we are to another attack. This is not a risk that is going to go away," she added, noting the eight-year gap between terrorist attacks on the World Trade Center.

One contrarian view was voiced by Mr. Froot of Harvard, who said risk analysts are already well on their way to "normalizing" terrorism exposures. "The market can handle this," he said. "There is actually quite a bit of historical experience already that can be used going forward for 'normal' terrorism events."

However, Mr. Kelly of Liberty Mutual echoed his fellow CEOs in dismissing this notion out of hand. "Terrorism is not an insurable risk," he declared. "This has to be a socialized risk." He said the industry would continue to pressure Congress to put a terrorism reinsurance program in place to stabilize the market in the short term, while heading off mass insolvencies if another attack occurs.

Mr. Kelly also agreed that terrorism exposures are long-term and impossible to eliminate completely, contending that the war on global terrorism "is like killing ants; you can never get them all."

The Joint Industry Forum was co-sponsored by nine p-c organizations, including the Alliance of American Insurers, the American Institute for Chartered Property Casualty Underwriters, the American Insurance Association, the Insurance Information Institute, and the Insurance Services Office.

The other forum sponsors are the National Association of Independent Insurers, the National Association of Mutual Insurance Companies, the National Council on Compensation Insurance, and the Reinsurance Association of America.