How has the Bermuda insurance market changed in the five years since the events of September 11, 2001? The short answer is: almost completely.

By most yardsticks, the Bermuda market is an entirely different animal from the industry sector that woke up to those awful images five years ago. Then as now, the reinsurance contingent from Bermuda was in Monte Carlo, but that is one of the few similarities between September 11, 2001 and September 11, 2006.

Five years ago, Bermuda had about a dozen major reinsurance companies. The Island?s dominant business line was property catastrophe reinsurance, although a handful of the largest companies had branched out to write other business. One or two had nascent insurance operations, too.

Fast forward five years, and Bermuda has more than three dozen companies with capital, or capital commitments, in excess of half a billion dollars.

Many of those companies now write a mix of insurance and reinsurance, an innovation spearheaded by the companies formed after 9/11. Almost as many write, or have announced their intention to write, life insurance and/or reinsurance.

Bermuda?s captive industry remains the clear market leader, but another innovation introduced in the past five years, the segregated accounts company, has changed the structure of that sector of the industry.

Finally, Bermuda is now home to a number of specialty markets, where five years ago it had few. The Island?s financial guaranty (also called bond) insurance sector is now the global market leader; aviation and satellite insurance has become a local specialty; the political risk sector has developed; and more than a dozen sidecars and catastrophe bond special purpose vehicles have been formed. Bermuda has also grown its casualty lines as a means of developing non-correlated risk.

So, in five short years, the Bermuda market has added breadth, depth and size. Total capital in the Bermuda sector has risen from $63.9 billion to an estimated $150 billion in the five years. Total assets have risen from $172.6 billion to an estimated $330 billion in the same period. Net premiums written have risen from $40.7 billion to an estimated $130 billion.

Progress has its price. Largely as a result of the prosperity all this success has brought, traffic is worse than it was five years ago; new schools have been built in the private and public sectors; building in the central parishes has altered the landscape; and the City of Hamilton has been, and continues to be transformed, most visibly on Par-la-Ville Road, now known as ?Bermuda?s Wall Street?.

Along with all this development has come the rise of concerns about the Island?s sustainability, and the public debate has been opened.

Bermuda certainly never has experienced, and may never again, experience, such a complex transformation in so short a space of time.

In the five years since the World Trade Center fell, international business, of which insurance is the driver, has become the largest non-governmental sector of the Bermuda economy, supplanting the hospitality sector. Work permit time limits have been introduced, from which insurance personnel have been exempted.

Bermuda has in those five years hosted the Class of 2001, the eight major companies formed in the wake of 9/11 that brought with them part of an estimated $18 billion (out of a global total of $25 billion) invested in the industry in anticipation of the hard market that usually follows major catastrophes.

The Island?s insurance sector then survived the economic damage caused by the four consecutive named storms ? Charley, Frances, Ivan and Jeanne ? that hit Florida and the Caribbean in 2003, laying bare the inability of insured companies to resurrect their coverage for the third and subsequent events.

All but four Bermuda residents survived Hurricane Fabian, the storm that hit Bermuda a little over three years ago, causing an estimated $500 million in damage.

Before the losses from 2003 could be fully digested, the Bermuda market faced its sternest test a year later, when Hurricane Katrina, and then its fearful sisters, Rita and Wilma, caused 2004 to record greater economic and insured losses than any other year in history. The Bermuda market suffered casualties from these storms ? PXRE and Quanta Capital Holdings look set to enter run-off; sEnergy has stopped writing new business; and Alea, Rosement Re and Western General have closed their doors.

The result of the two years of record hurricane activity resulted in the formation of the Class of 2005, the 11 new companies formed late last year. Perhaps the most interesting aspect of these new major enterprises is not the business they write ? most have opted for a mix of property catastrophe and niche products ? but their shareholders.

For the first time, hedge fund managers, who had previously taken a passing interest in short-term positions on peak risks, opted for major shareholding positions in many of the new companies.

Finally, several companies of size have already been formed in Bermuda in 2006. AXA Re will cede its reinsurance business, a $1.5 billion book, to Paris Re. Aeolus has announced its entry into the global reinsurance market ahead of the hurricane season, with an initial capitalisation of up to $500 million financed by a group led by Warburg Pincus and the company?s founders. XL Capital has spun off Security Capital Assurance. Wilton Re, a life reinsurer formed late in 2004, has struck two deals this year that have drawn on most of its $628 million capital.

Meanwhile, the rating agencies have increased the amount of capital required per dollar of premium, and a wave of downgrades into the BBB+ range is forecast.

The modelling firms have simultaneously amended their capital models.

Shortages of reinsurance, especially in the Florida and Gulf Coast regions, have roiled the industry.

Premium rates rose significantly in those regions at the January 1 renewals, and have continued to rise ever since. Companies that filled their books in January may very well have regretted it in July.

Finally, but least tangibly, it is probably fair to say that Bermuda now accepts, in a way that it did not five years ago, that its destiny is unavoidably intertwined with that of the insurance industry.