Even for those in it, this is risky business.

• Position: Insurance

The December ice storm that cost it $113 million in claims wasn't the only thing that cast a chill on the insurance industry in 2002. Add rising expenses, slumping investments, price increases from reinsurers--companies that sell insurance to insurers--and a rising tide of policyholder anger.

Only three sectors--life, automobile and workers' compensation--escaped in relative good health. "It's a pretty stressful time in the insurance marketplace," says Stuart Powell, director of technology and technical affairs for the Independent Insurance Agents of North Carolina, a Carybased trade association.

One sign of stress? Three Pennsylvania property-and-casualty insurers that operated here--Harrisburg-based Reliance Insurance and Philadelphia-based Legion and Villanova--shut down. Other insurers didn't disappear, but some of their coverage did. The St. Paul Cos., based in St. Paul, Minn., began phasing out malpractice coverage nationwide, dropping about 2,000 Tar Heel doctors and hospitals. Critics say, however, that the company is using malpractice losses as a scapegoat--$85 million in Enron stock losses was its real reason.

Other companies cut back operations. Take Royal & SunAlliance USA, the Charlotte-based American unit of London-based insurance giant Royal & Sun Alliance Insurance Group. In early November, it announced it would sell some units and slash its U.S. work force by about 1,500, including an undetermined number in Charlotte, as part of a restructuring to raise capital and cover claims costs.

Property-and-casualty insurers are feeling lingering strains from the 2001 terrorist attacks on New York and Washington, the stock-market slide and corporate financial scandals. As a result, they typically raised premiums 20% or more in 2002, compared with 10% or less the year before. "They can't use investment income to offset losses," Powell says. Even with rate increases, many insurers are making less money. For the third quarter of 2002, Greensboro-based Jefferson-Pilot reported $118.8 million in net income, 81 cents a share, down 11.1% from $133.6 million a year before, even though its revenue climbed 4.2%. J-P cites reduced gains from sale of investments.

Insurance Commissioner Jim Long blames many of the problems on the terrorist attacks, saying that $40 billion to $50 billion in claims have been paid nationwide. "You're seeing double-digit increases in reinsurance costs, probably in the 10% to 20% range." Experts say higher premiums...