Many insurance company shares are well up on their pre-September 11th levels, despite the huge claims payouts - currently estimated at around $70 billion (€78 billion) - which insurers face following the US attacks.

While insurance shares fell sharply in the knee-jerk market reaction to the attacks, the shares of the world's two largest re-insurers, Swiss Re and Munich Re, are up about 30 per cent on their September 10th levels; the largest European general insurers, AXA and Allianz are up over 30 per cent. In the US, AIG is up 9 per cent, Progressive about 16 per cent and St Paul over 20 per cent.

Investors could well ask why, given that companies are facing their highest level of payouts. A few reasons have been advanced: demand for insurance is expected to rise on fears of more terrorist action while demand in the property area will face constricted supply, insurers are rewriting their policies and upping prices in general and terrorist cover in particular, and customers are looking for "quality" cover to ensure any claims they may have will be met.

Despite their huge second-half provisions, the major insurers are having no difficulty raising capital on the back of the first big rises in premiums - after years of price competition as they built market share.