This year, no one was predicting a turn to a hard market until late 2009 at best, as NU wrapped the last of more than three dozen interviews with broker and insurance executives at NAPSLO in San Diego on the same Sept. 12 date.

Commenting mainly on predictable topics we routinely reported on in this newsletter during the prior eight months–strategies for surviving a soft market, merger activity, new product development, and the impact of an economic downturn on their businesses–the only potential wild card seemed to be Hurricane Ike, which headed for Texas that evening.

Even the few executives who turned their attention from Jim Cantore's forecasts on The Weather Channel playing in the hotel lobbies to check financial and insurance online news services on their handheld Internet devices, would have little clue about weekend events in New York that would rewrite the history of this year's events as pre-NAPSLO and post-NAPSLO–or more correctly, pre-AIG bailout and post-bailout.

“AIG Considers Emergency Funding Options, With Rating Downgrade Looming,” the NU Online News Service reported early the following Monday morning, detailing efforts to secure a multibillion-dollar emergency loan from the Federal Reserve to avoid a devastating ratings downgrade.

Two days later, the Fed came through, with our daily news service reporting that the U.S. government would take a 79.9 percent stake in AIG in exchange for the Federal Reserve Bank of New York providing up to $85 billion in emergency financing to stave off a bankruptcy filing at the parent company of surplus lines leaders Lexington Insurance, American International Specialty Lines Insurance company and the admitted specialty divisions of the domestic brokerage group.

The rest of the details of additional financial support, executive and personnel changes, and looming asset sales are still being written daily by reporters for our online news service and weekly in the pages of NU magazine, where Editor-In-Chief Sam Friedman has chosen the AIG tale as the No. 1 insurance story of the year on a list published in today's magazine print edition, also available online at www.propertyandcasualtyinsurancenews.com.

Even though our monthly e-newsletter isn't packed with the same breaking news headlines as sister publications, the AIG crisis ranks as No. 1 here, too, with our September and October features on actions of brokers and competitors responding to client concerns edging out previous contenders for the top spot–the continued soft market, and even the subprime meltdown that was the catalyst for AIG reversal of fortunes.

While the E&S/Specialty Lines Extra list of top-10 stories, like Sam's list for NU magazine, is entirely subjective, AIG's commanding position in the two surplus lines and specialty insurance markets made the drama on Pine Street the clear top-story choice. Our post-bailout articles have already begun to reflect the uncertainty of what lies ahead.

“At the [NAPSLO] meeting, which took place before Hurricane Ike hit the Texas coast and before Hurricane AIG shook the financial markets, members…viewed competition and an economic slowdown as their biggest headaches for the year up to that point,” we wrote in a post-bailout article about market challenges, unsure whether news of AIG's mounting problems would have significantly changed the comments of executives interviewed the week before the government took charge of AIG.

Likewise, we parenthetically noted that interviews about continuing softness in the medical malpractice market were pre-crisis, not knowing whether AIG's leading market share of about 7 percent on a claims-made might fall, or what the change would mean for the overall market.

In other areas, AIG's market dominance is even more evident.

“AIG and Lloyd's are far and away the largest E&S writers, accounting for 39 percent of the premiums written for the E&S segment as a whole, with premiums of $8.3 billion and $6.4 billion, respectively,” we noted in a footnote to an article by A.M. Best analyst David Blades about a financial analysis of the surplus lines market that he put together for NAPSLO.

More recent articles about the directors and officers liability market–where AIG commands 19 percent of the primary market and 12 percent of the excess market, according to the latest figures published by Towers Perrin–highlight the uncertainty that continued even two months after the bailout.

As professional liability brokers headed back out to California for another big specialty lines event last month–the Professional Liability Underwriting Society International Conference–they offered differing views on the impacts of AIG's turmoil and the subprime crisis on conditions in the D&O market.

“Do you know how it gets really, really quiet right before a hurricane hits? That's where we are right now,” said one brokerage executive, Peter Taffae, managing director of Executive Perils–predicting a Jan. 1 market turn for D&O.

Others, like Lockton's Rodger Laurite, pointed to the tremendous amount of alternative capacity available, suggesting that competition could keep prices soft for some time.

Is AIG undercutting competitors' prices to hold on to market share? Are competitors charging more to compensate them for their higher financial strength ratings?

We've just begun reporting experts' answers to questions about the market impact of AIG's struggles in E&S/Specialty Lines Extra.

Will AIG remain the largest U.S. surplus lines insurer and the dominant player in individual specialty lines like management liability and aviation in 2009? Stay tuned.

Below, we provide the complete list of our top-10 stories impacting the surplus lines and specialty insurance markets:

#1–Troubles Impacting Largest E&S Carrier Prompt Broker, Carrier Reactions

#2–Subprime Fallout; Claims Mounting

#3–This Space Is Getting Crowded: Standard Market Innovations/Bermuda Competitors

#4–E&S Execs Reveal Soft Market Strategies

#5–M&A Deals Rise In Specialty Sector

#6–Would You Believe Claims-Dispute Insurance?

#7–D&O Excess Coverage Battles Heat Up

#8–Hot Lines Can Burn Insurers–Check Out Medi-Spas

#9–Specialty Carriers Seek Gems Among Program Business Riches

#10–Who Are We Anyway? Associations Tackle Rebranding Initiatives

The remaining articles in our last 2008 edition of E&S/Specialty Lines Extra detail the No. 2-to-No. 10 choices on our list.

In the first few articles, we recount the top-five, which are stories that impacted the broader property-casualty market as well as the surplus lines market.

While articles published in our e-newsletter have a different emphasis, reflecting our desire to deliver information on the impact to the specialty market, this half of the list bears a strong resemblance to the one published in NU magazine today. (See related article for that list.)

Next, we describe the bottom-five–a group of stories that are probably more relevant to participants in the specialty segment than the broader market.

Our final article includes some afterthoughts on the lessons of 2008.