Despite what might seem heavy odds against them, the insurance industry is continuing to cover oil shipments coming out of Kuwait and local carriers flying into Kuwait.

Premium rates for aviation and marine risks have not risen dramatically yet, but the industry is watching carefully as events unfold and if a loss event occurs, the situation will change rapidly.

John Charman, chief executive of Bermuda-based AXIS Specialty, who made his name insuring marine risks in the previous Gulf War, said that this war had been a "non-event" from the insurance point of view. Due to the long lead-in time, many ship owners and airlines have managed to avoid the danger areas this time.

He said: "Most airlines and shipping companies have had a great deal of time to re-structure their operations to take this into account and furthermore hostilities have been confined to Iraq so there have been limited extra transactions."

The London insurance market has been careful not to over-react, says Rupert Atkin of the Talbot syndicate, a marine and aviation syndicate at Lloyds.

He agreed that only a handful of local carriers were still calling at Kuwait and most airlines had rescheduled to avoid the area.

While rates have not yet risen sharply, the market is poised to review very quickly in the event of there being a loss, said Mr. Atkin, adding that the market was keeping fully informed with a lot of security information being circulated.

Mr. Atkin is also chairman of the Lloyd's War Risks Ratings Committee which decides on a list of countries which constitute war zones. Ship owners are obliged to report to their insurer if any of their vessels sail into those ports.

Speaking with his underwriter's hat on, Mr. Atkin explained: "We make owners report to us that they're going there and we adjust the price accordingly."

On the marine side, he said: "Rates were put up in anticipation of the conflict, and then again when the conflict started, in particular at the northern end of the Gulf...Oil shipments are continuing to come out of Kuwait."

He said that owners were also being offered life and personal injury cover for their crews

Asked whether his syndicate had been approached for life insurance for servicemen, he said: "We have been, but they chose not to buy the price that was quoted."

Both men agreed that if the conflict escalates, rates will rise rapidly.

Mr. Charman said: "If either surrounding countries become involved, or if extra terrorist activity takes place internationally, then things will change quickly and we will swing into action."

He said that underwriters at AXIS would be on call 24 hours a day, seven days a week if necessary.

Mr. Atkin said that the possibility of terrorist acts to an extent affected rates on a world-wide basis. "A lot of risks subsist in possible terrorist acts, not necessarily in the Gulf region."

Asked whether Lloyd's underwriters had planned in advance for various contingencies, Mr. Atkin said: "We tend to be reactive, and decide how to react to an event."

On Friday night a scud missile managed to hit Kuwait's port area and did huge damage to a neighbouring shopping centre.

Mr. Atkin said: "If that starts happening on a regular basis, that's going to create a lot of alarm in the market because that was something we were given to believe could not happen."