It is too early to say "whether the current strong results put insurers in a better position than they were in the same stage of the last cycle," according to Mr. Wright.

He added that, "it is certain that long-tail reserving has prevented some insurers from building buffers at the peak of the market."

Mr. Wright also expects more mergers and acquisitions activity. "While this will generate goodwill on the expectation of increased earnings, there is still execution risk, which could potentially weaken insurers' financial strength if managements fail to deliver the revenue and cost synergies envisaged when the original discussions began."

Since European life and p-c operations are much more integrated, the strong results of the latter will be used to offset the weaker life performance, Mr. Wright said.

"Most insurers reported profit growth of more than 15 percent in 2004, well ahead of the 8.7 percent rise in the S&P Europe 350 Index," he said. "But the need to make up for the weaker results of past years, combined with a softening cycle and impending issue of new costs and processes to meet regulatory and compliance requirements, means that Standard & Poor's outlook for insurance ratings in 2005 remains stable."