Premium volume has dried up, claims inflation soared and capacity sloshed in, bringing slashed rates and cut-throat competition.

Foreign and domestic firms alike must weigh the prospects for recovery from a crisis that has wiped as much as 80 per cent off the value of some currencies against the US dollar and billions off stock portfolios -- and how long they can wait.

"Some people have been a bit optimistic about the depth of the problems in the region and the length of time it will take to recover," Russell Whitehouse, director, finance and underwriting practice Asia at Guardian Insurance told Reuters.

At the start of 1998, Asia's crisis was still thought by some analysts to be a short-term financial market correction, with insurance pundits predicting real premium growth ofnine per cent.

As the extent of the crisis became clearer -- with millions of people made jobless, industries grinding to a halt and projects cancelled -- drastic revisions were made to forecast.

Most players now would be happy with flat premium growth.

"A crisis like this wrecks plans. Three year pay-backs become five years. If you've already spent millions of dollars on just being here, next year could be make or break," said one Bangkok-based manager of a US insurer.

Car sales in Thailand, for example, have plunged. Motor makes up 60-70 per cent of the market's premium and the hit has been huge. Industry sources estimate half of Thailand's non-life players will have to find fresh capital or quit in 1999.

Indonesia, with its 200-million-strong population and once booming economy, was where many had pinned their hopes.

Bloody May riots that left 1,200 dead and preceeded the ouster of president Suharto after 32 years in power dashed plans and raised the spectre of huge hidden exposures on riotclaims for reinsurers that were unresolved as renewal talks began.

Reinsurers are among the hardest hit by Asia's woes as major projects and insurance programmes are axed at the same time as capacity from Europe and the US has flooded the market.

It has led to a rating war -- some 20 per cent on average has been lost in each of the past two years and cuts of 15 to 20 per cent are expected in 1999 -- and casualites are inevitable.

"There is going to be a bit of a wake-up call early next year for reinsurers," Bengt Johnsen, managing director of broker Aon Re Asia, told Reuters.

Cheap capacity has also stifled alternative risk transfer products, though its abundance has also seen buyers focus on reinsurers' financial security.

"You can get as good a price from an A-rated reinsurer as you could with anybody else in the market, so ratings are becoming more of an issue," Johnsen said.

This is just as well, given increasing exposures.

"Exposures are higher because covers are so wide that it would onlytake a few minor partial losses in some classes to start biting heavily into programmes. Then you are talking about five-year paybacks," he said.

The lure of Asia's huge premium potential is tempting bait.

When the region's economies recover, double-digit premium growth is expected -- well above the global four per cent average.

Foreign joint venture life insurers in Indonesia and the Philippines have benefitted from policyholder perception insurers with Western backing are stronger than domestic ones.

China and India have would-be participants salivating at the prospect of entry, with the stalled progress on liberalisation and licences viewed as a temporary irritation.

Even in the crowded and under-performing Thai market, six out of 12 new life licences granted in 1998 have been taken up, an indication of what many view the long term prospects to be.

Guardian's Whitehouse says when consumer spending rebounds, non-life business will boom with motor leading the way.

"My experience is that motoris the first class to go wrong and normally the first class to show some hardening. People talk about big ticket lines like infrastructure projects, but it will be the bread and butter business that come back first," he said.

Consultants and actuaries say they are busier than ever on merger and acquisition deals and capital injection projects.

Japan is set to see a flurry of activity in 1999 as `Big Bang' reforms allow cross-sector deals between banks and insurers and struggling players look to foreign firms for fresh funds.

"There is clearly much potential for alliances or partial acquisitions," said Yukio Fukuda, head of investment banking at Credit Suisse First Boston in Tokyo.

Japan's insurers must prove their financial health and meet tough solvency margin benchmarks at the end of March and the prospects are high they will need new capital to do so.

Fukuda thinks the action will come fast and furious, with all the serious deals done by the end of 2000.

"I think we are talking about big moneycoming in, about 300 billion to 500 billion yen ($2.6 billion to $4.3 billion). That translates to about three or four firms being tied up with foreigners through capital injections," he said.