A different climate: changes in regulation, health-care costs, market appeal and the weather drove the top insurance news stories of 2004.

FLORIDA INSURERS SURVIVE SEVERE HURRICANE SEASON. Despite the four major hurricanes--Charley, Frances, Ivan and Jeanne--that devastated Florida and the southeastern United States, the property/casualty industry overall remained strong, thanks to reforms enacted after Hurricane Andrew in 1992. The four storms have caused an estimated $20.49 billion in insured losses. In their wake, some insurers have sought rate increases, while Allstate Floridian stopped writing new homeowners policies.

HMOS BOUNCE BACK. In 2004, major managed-care companies saw double-digit earnings increases. United-Health Group Inc., Anthem Inc., Aetna Inc., Cigna Corp. and other health maintenance organizations attributed profits to improved management of health-care costs, premium increases or membership gains. Medical cost trends also appeared to stabilize in 2004, according to A.M. Best Co. In 2005, health insurers will see renewed pressure from corporate clients to return some of their profits through premium reductions, A.M. Best said.

EUROPE BECKONS BERMUDA, LLOYD'S. After a post-Sept. 11,2001, growth spurt in the United States, the hungry Bermuda market turned its gaze to Europe, where the straggles of domestic players opened the field in a less litigious environment than the United States. And following Chairman Peter Levene's admission in 2003 that Lloyd's had not done enough in Europe, the London-based market achieved access in all 25 European Union member states.

SPITZER PROBE LAUNCHES ATTACK ON INSURANCE PRACTICES. After months of subpoenas and interrogatories, New York state Attorney General Eliot Spitzer opened the floodgates in mid-October with a suit against Marsh & McLennan Cos., accusing the world's largest broker of abusing contingency commissions and participating in fixed and fraudulent bids. Within weeks, Marsh replaced virtually its entire corporate leadership, executives at three companies pleaded guilty to criminal charges, the tour largest brokers each announced complete overhauls of their business models, and the issue sparked Senate hearings and more than a dozen state-level probes.

CONGRESS DEFEATS INSURANCE AGENDA. The insurance industry's main issues on Capitol Hill--ending asbestos litigation, limiting class-action lawsuits, enacting caps on medical-malpractice jury awards--all were defeated last year, due largely to outgoing Senate Minority Leader Tom Daschle, D-S.D. With a firm Republican majority now in the Senate, and Daschle's defeat, the industry's agenda is thought to have a better chance of passage. Renewing the federal terrorism insurance backstop, another top priority, is likely to be taken up this year as well. Also, the emergence of Sen. Arlen Specter, R-Pa., as chairman of the Senate Judiciary Committee places a friend of the industry in a key legislative seat.

EUROPEAN REINSURERS REBUILD RAMSHACKLE MARKET. As legacy issues continued to dog reinsurers in 2004, and the much-hyped new "clean" Bemmda reinsurance capital notwithstanding, the market's fitful recovery hinged on the traditional Europeans--particularly three of the world's top five--Munich Re, Swiss Re and Hannover Re. They kept the formula simple--control underwriting and sacrifice premium volume for results--and improved profitability in 2004.

MEDICARE REFORM GIVES INSURERS PROBLEMS AND OPPORTUNITIES. The Medicare Modernization Act of 2003, passed amid bitter Congressional infighting, was the most costly expansion of the government-run health program in its history. At least $12 billion was earmarked for health insurer subsidies to encourage them to participate in Medicare. In the year since the Act's passage, health insurers still are grappling with compliance issues contained within the law's 1,110 pages. Most daunting for both insurers and Medicare is setting up and dealing with the program's new prescription-drag benefit, which is to be up and framing by 2006.

MORE LIFE INSURERS BECOME ONE. The life insurance industry continued to consolidate. In April, Canadian life insurer Manulife Financial Corp. completed its $11 billion merger with Boston-based John Hancock Financial Services Inc., creating the largest life insurer, based on market capitalization, in Canada. In July, Axa, the French insurance group, completed its $1.48 billion acquisition of MONY Group Inc. One industry expert with Ernst & Young recently said he expects consolidation to pick up in 2005, driven by cost pressure, lackluster sales, the need to grow distribution and back-office rationalization.

SMART ACT THREATENS STATE REGULATION, The State Modernization and Regulatory Transparency Act, or SMART Act, seeks to radically revamp the way insurance is regulated in the United States. Currently, a 1945 federal law says that states are the sole regulators of the industry. But the SMART Act, now in draft form and circulating through the House, would strip states' rate-setting authority, among dozens of other changes, and set up a federal "insurance coordination council." It's still unclear what authority states would retain and what form the final bill may take.

REGULATORY REFORMS ENHANCE AUTO MARKETS. Following a 2003 law expediting New Jersey's rate-filing approval process and loosening the strictures of the state's "excess profits" law, direct writer Geico announced a limited return to the market, while State Farm called off plans to exit and New Jersey Manufacturers ended the year by issuing rebate checks. In Massachusetts, a plan to gradually transition back to market-based auto rates was enough to persuade California-based Fireman's Fund to abandon plans to leave the state, where only 19 companies currently write auto insurance.