Bermuda-based reinsurers have already replaced half of the estimated $6 billion in capital lost as a result of Hurricane Katrina and Hurricane Rita, according to an industry analyst.

CBS MarketWatch reported yesterday that sales of shares and other securities by Bermuda-based reinsurers such as ACE Ltd. have raised more than $3 billion since Katrina ? the most expensive natural catastrophe in US history ? struck the US Gulf Coast last month.

Bermuda reinsurers are expected to be called on to pay claims of up to $5 billion from the storm, which may cost insurers between $40 billion and $60 billion.

But with reinsurance prices expected to jump as a result, many have already found willing buyers for new capital.

Reinsurers hope the extra financial muscle will help them underwrite more new business at higher and potentially more profitable prices, MarketWatch said, adding: ?But some analysts warned this week that the opposite could happen: armed with lots of new money, reinsurers may compete too aggressively for business, limiting price increases they?re chasing.?

The story said: ?When losses this big hit the industry, insurers and reinsurers are left with less capital to underwrite new risks. Just as the supply of coverage dwindles, demand often increases, leading to higher prices. That happened after September 11, when rates surged for at least two years.?

But the imbalance between supply and demand may be muted this time because so many companies are raising new capital so quickly, analysts said.

Yesterday, the Securities and Exchange Commission eased regulations for insurers raising new capital because of recent warnings by rating agencies concerned that losses from Katrina and Rita may result in capital shortfalls and liquidity concerns.

The SEC said its Division of Corporation Finance will allow Katrina and Rita insurance and reinsurance firms to simply send a notice by fax to activate an offering document before the SEC to raise up to 20 percent of the amount originally registered.

Typically under a shelf registration, a company may sell securities in one or more separate offerings with the size, price and terms to be determined at the time of sale.

The SEC said the regulatory relief will extend through December 1.

?These capital raises will limit potential pricing increases in the lines affected by Katrina,? such as marine and energy, David Small, an analyst at Bear Stearns, wrote in a note to clients on Monday.

Bermuda-based insurers and reinsurers have probably already replaced at least half of the capital they lost from Katrina, Mr. Small estimated.

Sustained periods of rising prices only happen when over-exposed insurers and reinsurers are forced to shut or cut back, he added.

?It is becoming harder for an insurance company to die,? Small said. ?Post-Katrina capital raises highlight investors? increasing willingness to give these players another chance, thereby keeping the insurance industry over capitalised.?

Cliff Gallant, an analyst at Keefe, Bruyette & Woods, issued a similar warning yesterday, predicting that the new money flowing into the industry could lead to undisciplined competition and pricing.

?Already, several reinsurers have been able to replenish balance sheets after their Katrina losses,? Gallant wrote in a note to investors.

?There is significant capacity throughout the global financial-services industry which has shown a propensity to quickly flow to the businesses where there is potential for quick returns, despite risks,? he added. ?Overcapacity in financial markets, especially insurance, rarely leads to good discipline.?

ACE raised more than $1.3 billion selling new shares on Monday, the most new capital so far.

The company said it plans to use the cash for ?growth opportunities in the global insurance and reinsurance markets?.

ACE ?is clearly trying to beef up its balance sheet for a potential upcoming hard market or to gain market share if such a market doesn?t materialise,? Bear Stearns?s Small wrote.

Still, Small questioned the move, given that price increases may be isolated to specific lines of business and that ACE was adequately capitalised before Katrina struck.

Montpelier Re raised more than $600 million by selling stock on September 16, while Endurance raised a similar amount selling stock, preferred shares and debt on Monday.

PXRE Group, a Bermuda-based property catastrophe reinsurance specialist which has been among the hardest hit by Katrina, said on Monday that it planned to sell 7.7 million shares.

The company also said it will hold a special shareholder meeting on November 18 to gain approval to sell an extra 300 million shares.

Axis Capital and Platinum Underwriters have also announced share sales worth $250 million and $162 million respectively.

More reinsurers could follow suit soon, Mr. Small predicted.

Max Re Capital, another Bermuda-based reinsurer, said in a September 26 Securities and Exchange Commission filing that it could raise up to $500 million by selling new securities.