Our last commentary was entitled Millennium Musings, faintly focussed on the changes that we thought were inevitable.

Now the changes are upon us.

At the time of this commentary an article appears to say that the United States property and casualty insurance companies have seen their losses grow by over 40% during the last year, a situation which most small companies would be very lucky to survive, whether they be brokers or insurers. Obviously some of the corporate attraction to Lloyd's also left for greener pastures very quickly.

It's a funny game if you think of it. There are very few business endeavours where it is possible to attract so much money with so little guarantee of an investment reward. The delightful attraction is the relatively small amount of money that is needed to start, the horror lies in what is ahead if you don't get it right. Admittedly, the technical world is far better equipped to assist insurers now than it ever was but apart from perhaps life insurance it is very, very difficult for the majority of insurers to derive much benefit from technical sources. This returns us to our origins where an underwriter, relying on his knowledge, quotes a price to accept a risk. He was not always right because insurance is one of the few businesses where you do not know in advance what your basic cost is. But, if he was wise, experienced and cautious the chances were that it would be about right.

Our problem in recent years has been too much technology and not enough knowledge. A recent encounter with an underwriter for a small and growing company led to his assertion that he personally had been responsible for a doubling of their income in certain classes of business but when asked whether this was true also of the profit there were many obscure references to comparative market share etc., etc.

After all there is nothing so satisfying to management as a doubling of income to go with a doubling of losses!

Well we know where all that has got us, the question is where do we go from here. From our position we think it is going to get very difficult. Obviously the major insurance centres of the world already have a very tough market, capacity is falling and risks are quoted on a "take it or leave it" basis. Most of the major domestic companies are engaged in some form of "navel gazing" where they will go through endless internal studies, "new teams for the future" and so on.

So far, only the high risk classes have been seriously affected but we are increasingly seeing more and more requests for assistance on fairly standard lines of business.

Buckle up - rough road ahead!