Insurance executives are underscoring the need for tighter analysis and pricing of risk following the September 11 terrorist attacks.

This as insurance industry leaders cite underwriting skills as having fallen below par in the past decade. Insurance companies have reportedly been able to do well, but through investment income rather than profits on premium revenues. In the wake of the industry's record losses from September 11 - which are estimated to be in the range of $35 to $100 billion - it is now paramount that risk be priced properly.

The push for improved underwriting practice was underscored by insurance veteran Jack Byrne in his acceptance of the seventh annual 'Insurance Leader of the Year' award last week: "Underwriting skills have been vaporised in the pursuit of growth," he said.

Another insurance insider at the award's gala dinner who asked not to be named, said: "For a long time insurance has been under-priced because of the nature of the market. In a soft market - and we now have a hard market - companies could buy insurance for a lot less than the cost of the risk, because of cut-throat competition.

"But companies did well because they made up on investment income. The idea was: 'You give me your money in advance, and I get to hold it for a while. I earn interest on that money.'

"It is paramount that there be underwriting discipline, but it is hard to when everyone is undercutting prices and you want market share."

The insurance executive said companies were cognisant that there would, at some point, be a loss that would result in a pay out.

"For the last ten to 15 years you did not have to know how to underwrite very well as people were not really pricing things based on the value of the risk. And you could end up writing insurance and giving someone a price that you were guaranteed to lose on when the loss happened. And if you insure enough, the law of large numbers tells us there is going to be a loss. But companies were able to make it up on investment income."

The executive concluded: "In the soft market insurance was not priced appropriate to the risk that companies bear. That has been changing with September 11. Prices have gone up to more properly reflect the real cost of the risk and underwriting is more important than ever. Good underwriters must really understand how to evaluate and measure and price that risk, and that is very much in need now.