“For a business faced with payouts of $40 billion or more in the wake of the Sept. 11 terrorist attacks, the property-casualty insurance industry is having a remarkably easy time raising money from investors,” writes Henny Sender in today’s Wall Street Journal.

“Even as many companies worry that a credit crunch will inhibit their ability to get needed capital as the economy slows, such insurers have managed to raise more than $2 billion in the past several weeks, and analysts expect more new capital in coming weeks. Some of the money is going into start-up businesses, and some is shoring up the balance sheets of longstanding operations.”

“The newest new money: Goldman, Sachs & Co. is joining insurance behemoths American International Group Inc. and Chubb Corp. in launching a new insurance and reinsurance company to open its doors by Dec. 1, according to people familiar with the transaction. The new company will have $1 billion in capital, about half of it put up by the three founders and the remainder to be raised from outside investors.”

“Behind the enthusiasm for the sector is the fact that property and liability insurers — after a decade of competing for business by lowering prices, and thus squeezing profit margins — now are in the position of increasing the premiums they charge, by greater than 100% in some business lines. Investors are betting that the price increases — possible because demand for insurance is increasing even as some weaker insurers are forced to retrench amid struggles to pay claims — will not only help the stronger insurers to cover the cost of payments to their customers, but also to post higher profits in the next few years.”

” ‘The pattern with catastrophic losses is that the price increases are greater than the losses,’ says Michael Weinstein, insurance-industry analyst for Putnam Investments in Boston. And while more terrorism could well occur in the U.S., investors are willing to bet on the industry because most policies now being sold specifically exclude terrorism coverage.”

“The entity being founded by AIG, Chubb and Goldman Sachs will be based in the lightly regulated tax haven of Bermuda. As many reinsurance contracts are in force on a calendar-year basis, the company aims to benefit from renewals that will occur Jan. 1; reinsurers, who assume some of the risk of policies sold by primary insurers, are expected to push through some of the steepest rate increases. Both AIG and Chubb will provide management to the new venture, but top executives will be independent of their parents, the people familiar with the transaction say. A Chubb spokesman confirms the deal but declines to comment further. Top AIG executives couldn’t be reached for comment.”

“In another new transaction, Warburg Pincus LLC, a global private-equity firm, is contributing $500 million, and Hellman & Friedman, a San Francisco leveraged-buyout firm, is contributing $250 million to Arch Capital Group Ltd., a Bermuda-based insurance and financial-services company, according to a person familiar with the transaction. Arch Capital didn’t return calls seeking comment.”