The biggest story of the month (and throughout the year) was the announcement that UK insurers would withdraw flood cover from homes on flood plains within two years if the government …

The biggest story of the month (and throughout the year) was the announcement that UK insurers would withdraw flood cover from homes on flood plains within two years if the government failed to toughen planning rules and fund new flood defences.

Insurers agreed, via the Association of British Insurers (ABI), to insure for existing domestic properties and small business policyholders, apart from in exceptional circumstances, for a two-year period.

However, so far the government has not stuck to its side of the bargain, prompting the ABI to call on it to increase flood defences spending by at least £145m.

The Office ofF Fair Trading (OFT) admitted in February that it had cleared the General Insurance Standards Council (GISC) rules only under one half of the Competition Act.

This prompted a long war with the Institute of Insurance Brokers and its director general Andrew Paddick. The OFT responded by throwing out the bulk of his objections and decided the GISC, led by chief executive Chris Woodburn, was not infringing competition law by using its dominant position to discriminate against general insurance brokers. Paddick went on win an appeal.

Standard & Poor's (S&P) provoked a storm of protest by claiming thousands of motor policyholders could be at risk of having their cover cancelled.

The ratings agency said it considered Ansvar, Trafalgar and Folgate to have weak or marginal strength characteristics. It consequently gave them some of the lowest financial ratings in the insurance industry and warned policyholders generally to check their insurer's financial strength ratings.

The three motor insurers reacted angrily, claiming S&P's ratings were outrageous, misleading and based on out-of-date information.

Not only the story of the month but the story of the year was when Michael Bright, chief executive of Independent Insurance, resigned.

His departure followed a difficult period for Independent when market confidence in the company crumbled after a 42% drop in its 2000 operating profits to £40.1m. Garth Ramsay was appointed temporary chief executive until a replacement was found.

Industry experts predicted the company would be unlikely to be the subject of a hostile takeover. However, the company dramatically collapsed and is now being investigated by the Serious Fraud Office.

The insurance industry announced in May that it is to cover part of the cost of Chester Street's Insurance's collapse through a new Financial Services Compensation Scheme.

The scheme was announced by Treasury chief secretary Andrew Smith in response to a parliamentary question by Scottish MP Tony Worthington, above. It was set up in November of this year.

There had been worries that some asbestosis sufferers would miss compensation because many policies written by Chester Street related to injuries incurred before the 1972 Employer's Liability Act.

The collapse of Independent Insurance took everyone by surprise. True, there were rumours of under-reserving, but the reality is that no one - not the regulator, not the actuaries, not the city analysts, not the ratings agencies, not the financial press - saw the fall coming.

Insurance Times reported as late as March this year that analysts were advising people to buy Independent shares, and ratings agencies were assessing its financial strength as good.

It also transpired that the FSA was warned in December 2000 that Independent's French company was reserving claims for virtually nothing.

Lloyd's 51 worst-performing active underwriters were told their trading rights could be axed. Of those warned, 27 have stopped or will cease to be active underwriters at Lloyd's by the end of 2001.

Historically, syndicates' performances have been ranked according to capital loading exercises. But in January, Lloyd's chief regulator David Gittings announced a crackdown on the poorer performers.

Gittings spelt out "seven deadly sins" that would spark regulatory action. These included inadequate independent reviews, reinsurance recoveries, aggregate monitoring and credit controls.

Now those responsible for writing risks for performers in the bottom quartile are being held personally responsible. The worst syndicates have been identified according to Lloyd's 1998 results and predictions for 1999.

Gittings said: "We are taking things seriously, as what we are looking for is making profits. Those that make losses are no longer acceptable." He added the move was part of a campaign to drive up standards but was also intended to make London a more attractive place for insurers to do business.

"We need to protect our licences around the world and maintain the ratings of the market."

The Claims Direct saga reached a new climax when former chief executive Colin Poole, above, broked his own deal with private investor Simon Ware-Lane to sell the company for 10p per share - exactly the same price he paid to take control of the company earlier.

Ware-Lane, who owned 4.5% of the no win no fee giant, discussed buying Poole's and co-founder Tony Sullman's shares and replacing the board with his own management team, working alongside existing staff.

Mark Langford, chairman of Claims Direct's rival The Accident Group, said Sullman had touted a possible sale to him earlier in the year.

The World Trade Centre atrocities shook the world and left the insurance industry reeling.

The massive financial losses incurred by the insurance industry from the attacks have made the market harden. It was stiffening even before the attacks, but since 11 September, premium rates have rocketed as brokers desperately seek cover for their clients.

It is also believed to be a watershed for the insurance industry, which will bring risk management to the fore.

Gerling, St Paul International, Aon, Marsh and Guy Carpenter all had employees in the building.

Towergate Underwriting Group announced a £20m deal to buy Folgate Insurance from its German parent company Wüstenrot & Württembergische (W&W).

It buys the company as a going concern, which chief executive Peter Cullum, above, said gave his company a lead over other bidders, including MMA and Churchill

He said Towergate which has a gross written premium of more than £200m per year, planned to spend another £40m over the coming year on regional brokerages and was already in talks with several well known companies. Towergate is expected to concentrate on Folgate's existing schemes.

The story that got tongues wagging was the news of Churchill Insurance's intended acquisition of Prudential Insurance Services.

Prudential's general insurance division was yet another acquisition for Churchill, which had already spent £500m in 2001.

Earlier, it took over the underwriting portfolio of Pearl's general insurance business, acquired travel insurance specialist Inter Group and bought the UK general insurance business of financial group AMP.

The Prudential move made Churchill's parent Winterthur the sixth biggest insurer in the UK.

Regulatory news made the headlines with the announcement the regulatory responsibility of general insurance broking would be passed to the Financial Services Authority (FSA). The FSA will also take control of mortgage advice, streamlining the regulatory regime across the financial services sector.

Treasury economic secretary Ruth Kelly said this would be beneficial to the consumer and to business.

FSA managing director responsible for consumers, investment and insurance John Tiner, above, told the Insurance Times special risk teams would be deployed to check company books and senior executives' conduct.