The $12 billion estimate for insured catastrophe losses worldwide was well below the average $21.5 billion since 1990.

"(This) is not proof that the trend of increasing losses is broken now," Swiss Re head of natural catastrophe cover Ivo Menzinger told Reuters in an interview.

"On the contrary, there is an increase in values in general, insurance penetration is increasing (and) people still tend to move to exposed regions such as Florida," he said.

"The factors causing higher losses - greater population densities and higher concentrations of insured values - still remain," putting further upward pressure on the cost of insurance, he said.

BALANCE SHEET REPAIR

Apart from a need to cope with freak events such as floods, insurers, and with them reinsurers, are focusing more and more on making their core insurance business profitable now that falling financial markets have eaten into investment earnings.

Since investment income can no longer be relied on to offset shortfalls on the insurance side, insurers and reinsurers are forced to curb risk exposure, writing policies more selectively and seeking better compensation for taking on risk.

To help rebuild balance sheets sapped by turbulent financial markets, non-life premiums look set to rise by up to five percent a year for the next three years, Swiss Re has said.

The industry was also hit hard in 2001 by record high insurance losses for the September 11 attacks, which triggered an industry-wide review of terrorism cover. Estimates for WTC costs go as high as $80 billion.

Menzinger expected flood insurance in many countries to gain in importance because this year's floods had jolted home owners and policy makers into realising the inadequacy of existing private and state schemes.

Thousands of the people affected by floods which spread from England to eastern Europe had little or no cover, forcing governments to step in to provide relief.

"We are convinced that this is going to change. There has been underestimation in the past," he said. A growing awareness of climate change would also lead to more cover.

"We are going to see more intensive and more frequent precipitation (rainfall), especially over vast areas of Europe. There is still large development potential for flood insurance," he said.