It had been hailed as one of the most positive meetings in its 45-year history. Reinsurance rates were predicted to rise on average by between 15% to 20% and it was finally time for a upswing in the insurance cycle.

But the mood at the Monte Carlo Rendez-Vous took an unexpected turn, as the terrible events of last Tuesday began to unfold.

At 3.15pm, news of the first plane crash in New York reached the Cafe de Paris. I saw reinsurers rushing around, abandoning scheduled meetings to find out if colleagues based in the Twin Towers had escaped.

While some frantically made calls on their mobile phones, others crammed around the television in Aon's hired suite at the Hotel de Paris.

One distraught Aon broker, based in New York, said: “It's outrageous, it's a crime. I can't reach my colleagues on their phones or cellphones.”

Avner Flavio Hannuna, president of Uni-Mat, which underwrites facultative marine hull and cargo business from the Italian market, said: “Never in the history of insurance have I seen something so big. This will be one of the biggest losses ever in the insurance market.”

Within minutes, Monte Carlo was transformed from a sunny and glamorous James Bond setting to one of mourning and despair.

For the following days, shocked delegates lamented missing family, friends and colleagues. But at the same time, the realisation that the insurance market was now in disarray began to dawn.

Ironically, reinsurers and analysts had cited the predicted rise in rates as good news, but not enough. Now, following last week's disaster, the rates look set to rocket.

Stephen Cane, chairman of the International Underwriting Association (IUA) and chief executive of Alea London, was discussing renewal rates in France at the time of the tragedy.

“What has happened now is those increases will continue to come through but it is more than likely they will be greater than previously envisaged,” he said. “The recent hardening of the market came about because the industry has been suffering for quite a while. But the suffering is going to be even greater because of the events.”

Last Monday and Tuesday, rate increases were expected to be in the region of 15% to 20% across the board. Although it is too early to predict exactly how much they will shoot up by, a major senior analyst has now described the market as “one of the hardest we have ever seen”.

Another said they would not be surprised to see reinsurance rates rise between 35% to 40% across the board. And certain lines of business such as aviation may jump two-fold.

Counting the cost
A Lloyd's reinsurer in the catastrophe sector called the hijacking the biggest man-made loss ever. “All classes of business including property damage, personal accident for passengers, worker's compensation, aviation liability, motor and key personnel will be affected,” he said. “The losses will total $20bn (£13.6bn) or more. It is going to have a big impact on rates in the market, but it is still in an early stage at the moment.”

Deputy chairman of Jardine Lloyd Thompson's London operation and chairman of Corporation Risks and Services Group Dominic Collins added: “It is too early to speculate. But the market is in considerable disarray and people are not sure about what kind of reinsurance is in place.

“The way the market is operating at the moment, a lot of people cannot do anything. But insurance costs must go up substantially.”

Collins, who was involved in North American reinsurance during the 1980s, said the reinsurance sector is now facing “the most difficult position” he had ever seen.

“Before it was a difficult but an orderly market,” he said. “Now there are circumstances no one has ever seen before.”

Charles Catt, associate of consultant provider Insurance Solutions and former managing director of Nac Re, agrees.

“Both rates and available capacity are going to be moved dramaticall,” he said. “This will be one of the largest movements ever seen as the losses start to unfold.”

He added that rates for all areas of reinsurance were liable to be affected, including aviation, marine and property.

“I am not sure about how many people will still be in the market,” he said.

“The less capacity there is, the higher the rates are going to go. People may review whether or not they want to be in the business and a lot of people are taking strategic reviews as to their involvement in this area. Capacity will shrink.”