Travel insurers saw a significant drop in their premium income last year, as a result of 11 September and the foot and mouth outbreak.

The disasters were a double-whammy for the industry. Domestic tourism ground to a halt during the outbreak of the disease and foreign travel slowed after the attacks on the World Trade Centre.

Royal & SunAlliance head of travel insurance Fiona McDonald said there had been a fall in the sales of single trip travel insurance policies in 2001 compared to 2000.

But she added that there had also been a change in typical travel patterns.

"More people are now choosing to travel to Europe rather than the US," she said.

"This has meant a fall in premium income as premiums for the US are up to double those for Europe."

Some travel insurers claim to have recovered quickly from last year's disasters.

Fortis Insurance senior travel underwriter Paul Martin said: "Immediately following the events of 11 September, there was a reduction in the number of people travelling abroad, particularly to the US and other long haul destinations.

"However, levels of business appear to have recovered quickly and we have since seen encouraging growth in business volumes."

But one industry analyst said travel insurers had lost "tens of millions" in 2000.

"The ones that have been hit the hardest are those which rely solely on travel rather than the larger insurers that have their fingers in many pies," he said.

The Association of British Travel Agents estimates that 16 tour operators and 20 travel agencies went bust last year.

Big travel groups such as Thomas Cook, Thomson and Airtours have also cut back, leading to thousands of job losses.