The report analyzes catastrophe exposures and current market conditions for catastrophe reinsurance for each of these markets, as well as the availability of insurance from private sector and government sources to cover losses.

Immediately after Sept. 11, 2001, terrorism coverage virtually evaporated after having been "practically given away in prior years, " the report said.

Salvatore D. Zaffino, chairman and chief executive officer of Guy Carpenter, said that Sept. 11 events had turned a firming property-catastrophe reinsurance market "into a classic hard market, with substantial price increases and significant capacity shortages."

However, he noted, "there were other factors contributing to actual and potential losses for the reinsurance market, including corporate scandals resulting in significant liability losses, falling equity and bond prices translating into poor investment earnings, and a new wave of asbestos claims, adding pressure on the marketplace."

Industry opinions are divided over whether reinsurance prices will continue to rise, or whether the end of the hard market is on the horizon, noted Mr. Zaffino.

"There are signs of the beginnings of a softer market, such as increased capital flowing into the industry, indications of price weakness at July 1 renewals, and the relatively low catastrophic loss experience so far this year. But there are a number of troublesome issues as well, suggesting that the market may continue to harden through the next renewal season that starts in January 2003," he said.

The study includes a country-by-country synopsis of primary insurance and reinsurance initiatives to deal with the risk of terrorism. Twenty-four countries representing North America, Europe, Africa, Asia/Pacific, and Latin America were examined.

Mr. Zaffino said terrorism losses are weighing more heavily on the market this year than natural catastrophes. He said the insurance and reinsurance industry can be proud of its record coping with terrorism last year, after the attacks of Sept. 11 caused the largest insured catastrophe loss in world history.

The Guy Carpenter report is available on its Web site, www.guycarp.com, or by e-mailing the firm at: [email protected].