When I started my brief stint in the reinsurance business in late 2007, the words "excess capital" were on everyone's lips. Reinsurers had record capital on hand and were pushing dividends and share buybacks because they couldn't find ways to make it productive. Two years later, we're getting close to those record levels, according to a new report from Aon Benfield (AON), despite everything that's happened in between – the financial crisis, Hurricanes Gustav and Ike and the earthquake in Chile, for example.

If you look at the financials, it's almost like nothing has changed, and let's hope the lessons learned in between aren't obscured by the full pockets that reinsurers can now boast.

Florida's insurer for high-risk homeowner policies, Citizens Property Insurance Corp., is issuing a bond to beef up its balance sheet. The state property insurer, which takes on the risks that private insurers in the state will not, is looking to raise around $2.5 billion.

The "pre-sale" ends on April 6, 2009 and was called "very successful" by Citizens CFO Sharon Binnun, who continued, "We met our liquidity goal for the year." A quiet hurricane season in 2009 left Citizens, the largest property insurer in the state, with a surplus of around $14 billion.

After weeks of speculation, the financial damage from the Chile earthquake and Windstorm Xynthia in Europe is starting to emerge. According to a recent report by Moody's, 16 global reinsurance companies have reported their net insured losses (before taxes) from the catastrophe event, and the damage has already reached $3.5 billion, increasing an already high tally. The firm expects these events to have a noticeable impact on first quarter results for the industry.

According to the report, the first quarter of 2010's results "will have many moving pieces, including the possibility of favorable loss reserve development." It continues, though, that "we would expect a number of reinsurers to post both operating and net losses for the quarter."

Merna Re, the largest catastrophe bond of all time, is set to mature in June, and State Farm is already putting together its replacement, the creatively named Merna Re II. The successor, planned for issuance in April, is said to be for $400 million in risk capital, though investor demand could push it as high as $700 million. This still pales in comparison to the $1.2 billion that the original brought in the door.

If State Farm is able to stimulate demand for Merna Re II, which would protect the company from non-California earthquake risk in the U.S., it will be third cat bond to come to market in 2010, which is expected to be a strong year for this form of risk transfer. The cat bond market fell silent after the near-collapse of American International Group (AIG) in September 2008 but was still the third busiest in terms of capital issued in the history of the cat bond market. Heading into 2009, prospects for the cat bond space seemed uncertain, but a robust fourth quarter eventually resulted in a year-over-year increase, driven mostly by repeat issuers.

Beyond the torment it has already caused in the Carribbean and the stress it places on those who are evacuating the Gulf Coast, hurricane Gustav will lead to higher prices at the pumps. That's because the majority of the Gulf of Mexico's oil production is shut down in anticipation of Gustav's force.

Exactly how much production is being shut down? CNNMoney reports that "energy producers have shut in approximately 77% of oil output and 37% of natural gas production in the Gulf of Mexico." This is affecting three producers particularly hard -- Royal Dutch Shell PLC (NYSE: RDS.A), BP PLC (NYSE: BP) and Chevron Corp. (NYSE: CVX).

And the production shut-down is significant -- "nearly 1 million barrels of daily oil production is now shut down. The last time this happened was in November 2005, after Hurricanes Katrina and Rita. In addition, 2.75 billion cubic feet of daily natural gas production is now shut down" according to CNNMoney.

Oil rose for a fourth straight day Thursday as Tropical Storm Gustav prepared to enter the Gulf of Mexico causing oil / natural gas companies to evaluate oil rigs in the area.

Oil rose above $120 a barrel earlier Thursday morning, but is now trading below that level. Oil has risen about $10 in a week on hurricane concerns and geopolitical tensions.

The other, major energy commodities also jumped Thursday morning on news of storm's likely track. Unleaded gasoline rose 6 cents to $3.12 per gallon, heating oil increased about 6 cents to $3.32 per gallon, and natural gas climbed 8 cents to $8.69 per million BTUs.

As of 8 a.m. EDT, Gustav was located about 70 miles east of Jamaica at 17.8N Latitude and 75.6W Longitude, moving west/southwest at 6 mph, with top wind speeds of 70 miles per hour, according to weather.com. Forecasters expect Gustav to track west/northwest, enter the Gulf of Mexico, strengthen to hurricane status, and strike the U.S mainland between Houston and the Florida Panhandle, with the most likely landfall being Louisiana.

Oil started and finished 2006 at roughly the same place... $60 a barrel. But the year in between was far from boring.

As we started off the 2006 year things could not have looked better for the oil industry. Prices were sky-rocketing and by the middle of the year we were looking at all time highs for the precious crude. However, the latter half of 2006 proved to be tougher times on oil and we have since seen a pretty harsh pullback.

Prices hit a peak of around $80 a barrel late in the summer as questions loomed about a harsh upcoming hurricane season and the markets were spooked about rising geo-political unrest. While the ongoing conflict between the United States and Iraq are enough to create some serious doubts about the stability of the Middle East, we also saw a massive military conflict between Israel and the militant group Hezbollah in Lebanon in June and July. At the end of July prices were soaring into the upper $70's all we were hearing was about $100 oil and how fast we would get there.

What a difference a couple of months have made. The Israeli / Lebanon conflict fizzled out and a non-existent hurricane season has come and gone. We are now looking at oil priced around $60 and in danger of heading down to the mid $50's towards the beginning of 2007.

After a 2005 seasont that produced hurricane devastation that the country has never seen before, 2006 came in with a remarkably calm hurricane season. While most weather forecasters had predicted an unusually strong hurricane season, what we saw was a season where no hurricanes at all hit the American coast. This was a welcome sigh of relief for a country that is still trying to deal with and overcome 2005's devastating season, but for the oil investors out there it was just another reason to sit back and watch your oil investments continue to fall.

With the geo-political arena cooling off, and no hurricanes hitting the coast, prices plummetted down about $25 a barrel between August and October pushing once record high prices down to the mid to upper $50's. While this is still very high for oil, it was enough of a drop to catch OPEC's attention and rumors started to swirl about the oil cartel instituting some uniform cuts to their daily output.

OPEC decided back in October that it would go ahead and trim its output by 1.2 million barrels a day, or roughly 4% of its total daily output, starting the first of November. But could this decision be trusted? OPEC does not exactly have the best reputation for adhering to production pull backs during times of high oil prices. Many felt that the decision to cut back on inventories was merely an attempt to please the Middle Eastern world, but was never meant to be taken seriously and was just a last ditch effort to create some price stability to keep oil trading at or above $60 a barrel.

GE closed today at $33.87 down 20 cents, a mere blip downwards of .59 percent. GE today wasn't announcing big news, just finishing up its spinning off of its reinsurance business.  This deal makes Swiss Re the world's largest reinsurance firm. A further bonus: GE picked up an additional $1.8 billion in the deal as GE Insurance's book value increased since striking the deal.

The Insurance section of GE has cost the company a lot, losing over $700 million and needing some $3.2 billion of capital. Immelt must be thrilled to see GE finalizing this deal. As he admitted in the last investors meeting, 'he no longer has to obsessively watch the weather channel.'