WTC losses have been absorbed claims Benfield

The Insurance and reinsurance markets have absorbed the fallout from the 11September attacks, according to a report from the Benfield Group.

The group's third report since the attacks was up-beat about the insurance industry's response to the losses.

A spokesman said: "Perhaps because price hikes have been so severe, the predicted 'flight to quality' which would supposedly have enabled the higher rated reinsurers finally to impose differential pricing has not materialised, despite a greater overall focus by cedants on reinsurer ratings solvency."

The report also highlighted the fact that reinsurers' costs for WTC development are significantly lower than first feared. The report noted that industry loss estimates have fallen to £25.5bn.

However, the report stressed that many insurance issues remain to be solved a year after the World Trade Centre attacks.

Among these Benfield highlighted the lack of terrorism legislation in the US and the airlines' reliance on ad hoc cover.

Benfield also shed concern over Gerling's withdrawal from the reinsurance sector.

However it also highlighted the benefits of the emerging "reinsurance order", caused as a result of 11 September.

The report added: "Gerling's currently uncertain future reflects the post-WTC shift in capital away from the old established reinsurers to start-ups unencumbered by past liabilities."