An industry defined by the transformative effects of shock losses changed again with Hurricanes Katrina, Rita, and Wilma and the 2006 reinsurance renewal - as combined insured losses reached USD60.5 billion. Despite the extent of the damage, these storms did not cause substantial losses of capital, as the rest of the property and casualty (P&C) insurance industry was highly profitable. The insurance industry as a whole recorded a combined ratio of 100.7 and a rate of return of 10 percent. Further, the reinsurance industry was no longer a closed system — external capital was readily available. More than USD35 billion flowed into the industry through a variety of instruments, including start-ups, catastrophe bonds, and sidecars.

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