The Swiss Reinsurance Company has announced a loss of SFr165 million, blaming the "negative impact" of the September 11 attacks.
The figure is slightly better than the SFr200 million loss forecast by Zurich-based Swiss Re back in February, but it pales in comparison to the SFr2.96 billion profit registered in 2000.
The loss includes the SFr2.95 billion cost of the September 11 attacks and a reduction in net realised investment gains of SFr1.61 billion.
Swiss Re said that aside from September 11 and the reduction in capital gains, 2001 was a positive year for the group.
"Despite the worst year ever for insured losses, Swiss Re strengthened its position during 2001 and is now well placed to capitalise on improving markets and achieve superior results in the years to come," said Walter B Kielholz, chief executive officer of Swiss Re.
Last year proved an "annus horribilis" for the insurance industry as a whole, with the terrorist attacks on the United States likely to leave their mark on the sector for some time to come.
Insurers have already hiked premiums - sometimes drastically - as is the case with the airline industry. Swiss Re, the world's second largest reinsurance outfit, increased premiums by more than 15 per cent from January 1.
The attacks have also raised a whole host of questions about how cover can be provided against such events. "Post-September 11 cover against the risk of terrorist attacks remains very limited," said a Swiss Re spokesman.
The impact of the attacks on New York and Washington sent shockwaves throughout the insurance industry. "This type of risk is virtually impossible to calculate in terms of its intensity and its frequency," explained Swiss Re in a study on the "new threat" of terrorism.
However, Rene Locher, an insurance analyst at Bank Sarasin, thinks the terrorist attacks in the US were not the only reason for the insurance industry to be badly hit.
"I think there were two reasons for Swiss Re's bad results. One was the September 11 attack and the other was the decrease in equity markets. Insurance companies live off financial results," he told swissinfo.
European terrorism cover
Faced by such a challenge, some insurers have decided to join forces. Six European firms, including Switzerland's Zurich Financial Services and Swiss Re, announced last week the creation of a special terror-related risk fund, Special Risk Insurance and Reinsurance, based in Luxembourg.
Its aim will be to provide cover for physical loss or damage to property arising directly from acts of terrorism in Europe. However, strict conditions will apply and only damage occurring within a 600-metre radius of the insured property will be covered, up to a maximum of €275 million (SFr403 million).
Another means of providing cover against terrorism might be to call on individual governments to act as an insurer of "last resort".
Last year, the Swiss government said it would cover any losses sustained by Swiss airlines in the event of a terrorist attack. But this guarantee was withdrawn at the end of December.
In Europe, three countries - Britain, France and Spain - already offer cover against terrorism. The Swiss Insurance Association (SIA) has set up a working group to examine the viability of similar private/public cover being offered in Switzerland.
"The insurance industry is hoping to find a solution that, as far as possible, doesn't involve the government," said Mathias Berger, a spokesman for the SIA.
"But there are areas where the government already plays a role, as in the case of nuclear reactors."
A working group has also been set up by the Swiss government to look at the issue, involving representatives from the Federal Office for Civil Aviation and members of the insurance industry.
swissinfo/Pierre Gobet, Zurich