There's money to be made by going offshore and in run-off, says Elliot Lane

What are the challenges for 2004? As we publish the first 25 of Insurance Times Top 50 Players this week, the choices have been made on their influence over the coming year's events.

That's not to say we have a crystal ball, but there are some clear indications on what is hot and what is not.

Peter Hubbard has finally announced the full extent of the AXA strategic review and it's the slow boat to Mumbai for 230 call centre jobs. Hubbard's announcement coincided with yet another round of banks and insurers playing the offshoring trump card to re-align the appalling expense ratios of the past year.

Hubbard, like the rest, will be under the microscope this year from the unions as much as the shareholders to justify the plans. AXA has finally become "e-enabled" to tackle some of the service issues brokers' have been moaning about for the past 18 months.

Offshoring to India, South Africa, Dublin (even Argentina) will cause more bad press this year. Lloyd's TSB Insurance has some new thinking with managing director Phil Loney. He has a number of successful offshoring and outsourcing achievements under his belt and wants to set up a satellite operation in Turkey.

Lloyd's TSB announcement of 1,000 jobs going offshore includes the insurance division.

Research shows that 90% of queries to a UK call centre are resolved in one call compared to a third of callers to India having to ring back. But a call centre employee in India is paid one-eighth the salary of his contemporary in Leeds.

Another topic of contention will be the FSA's CP190. Insurers are waiting for the final rules and the Treasury's inquiry into the Gibraltar market before deciding how much capacity and how many people are dedicated to offshore markets.

In the broker sector, the validity of the network proposition will be tested. Towergate and Folgate look the most promising because the model is there and the commission is being paid. Rumour has it that the Total Broker Solutions (TBS) roadshows gauged a great interest and response from brokers- but the recipient was Folgate not TBS.

Mazar's report late last year predicting the end is nigh has been basically trashed by the industry. Independent brokers will remain on the scene, and those who have been thrown out by the networks through due diligence, will have to adapt to the FSA rulings. Resilience will keep them going.

Finally to the two 'r's - run-off and reinsurance. Predictions are that run-off will be the biggest market of growth this year. And not just because of solvency issues, but as an industry in itself. So 2004 will bring a vibrant market where companies trade in run-off businesses and the profitability (albeit off the back of outsourcing) will drive more companies to enter the market. Companies such as Capita Insurance Services, Rubicon, CMGL, the new Randall Group and Lloyd's itself under the auspices of Jeremy Pinchon are ones to watch.

Finally reinsurance will fall under the gaze of Canary Wharf. This year the FSA will turn its full attention to risk transfer and solvency expectations in the reinsurance market. The new European Directive on reinsurance will act as the whipping boy.

But if you an Aries broker with interests in an Indian run-off business, working in both the Lloyd's and London market, with a big deal coming in May - beware!