Hurricane Katrina looks likely to be the worst hurricane to hit the US since Hurricane Andrew in 1992 and will almost certainly take a heavy toll on Bermuda reinsurers' bottom lines.

But the storm, which smashed into the Gulf Coast region on Monday after striking south Florida last Friday, probably won't result in downgrades to reinsurers' all important financial strength ratings, US ratings agencies said yesterday.

Katrina, now estimated to have caused between $9 billion and $16 billion in insured damage, is likely to cost the companies more than last year's wave of smaller hurricanes that hammered Florida and the Caribbean. That's because Katrina is counted as a single event that will result in claims to the catastrophe reinsurers.

Fitch Ratings said yesterday that Katrina was likely to produce the largest insured loss from a single storm since Andrew, which caused $20 billion in insured damage.

Risk prediction agencies that track hurricanes lowered earlier estimates that were as high as $30 billion to between $9 billion and $15 billion.

Both Fitch and Standard & Poor's said Katrina's impact on insurers and reinsurers is unlikely to mirror last year's experiences, when a wave of serious hurricanes slammed into the Caribbean and Florida, causing billions of dollars in insured losses.

In a special report, 'Not A Case Of History Repeating: Katrina A Very Different Monster Than Last Year's Florida Storms,' S&P said Katrina, as a single large storm, instead of a series of smaller ones like last year, was likely to result in the bulk of claims being borne by reinsurers, especially if total insured losses reach some of the higher estimates.

Katrina was a category one storm when it hit southern Florida, and strengthened into a category five storm before hitting the Gulf Coast. Over land it lost some strength which minimised its capacity to wreak havoc, as did a turn away from the densely populated city of New Orleans.

S&P said Katrina was also different from last year's storm because Mississippi and Louisiana, where the damage from Katrina was heaviest, do not have the back-up of state-run reinsurance programs, as Florida has. Florida's programme paid out an estimated $3.4 billion to insurers after last year's storms there. Insurers active in Katrina's path will have to depend on private reinsurance or their own resources to make good on claims.

Losses from water damage might also play a heavier role in Katrina's wake than in Florida. With wind and water damage often covered in separate policies for homeowners, determining the source of damage to a property and whether it is covered could prove a large and contentious issue, S&P said.

Lastly, although Florida's storm damage was heavily residential, there are significantly more damaged commercial properties in Louisiana and Mississippi, especially in the oil, gas, chemical, and gaming sectors, with the region having numerous casinos, S&P said.

The London market is likely to absorb many of the energy and marine claims, with that market having a hold on these specialist insurance areas.

"Although damages are still being tallied, we think it is highly unlikely that there will be many ratings changes among the largest affected insurers," said Thomas Upton, managing director of S&P's US property and casualty insurance practice.

Bermuda-based insurers were not listed amongst those that are most likely to face the greatest claims from Hurricane Katrina.

The five largest direct underwriters in Louisiana are Allstate Corp., State Farm, Progressive Corp., St. Paul Travelers Cos. and American International Group Inc., according to S&P.

It could be a different picture for the Island's reinsurers. While Bermuda's reinsurers may individually take days, even weeks, to issue estimates of what they could pay out in claims arising from Katrina's damage, it could be as high as 30 percent of the total bill, based on the significant size and market capitalisation of the Bermuda reinsurance industry.

Brokers, who find reinsurance and insurance for their clients to buy, generally put the scope of losses taken by the Bermuda market, for any one event that occurs in an area where insurance is commonly sold, at between 20 and 30 percent of total claims.

Reinsurance is insurance bought by insurers wishing to spread the risk contained in the policies they have sold.

Whatever Katrina's pricetag, it will hit an industry already reeling from multi-billion dollar claims after unprecedented storm activity last year. As well the industry must steel itself for possible claims from other hurricanes that could develop and make landfall during the remainder of the season, with predictions of up to 11 hurricanes this year.

In total, the 2004 bill from powerful hurricanes Charley, Ivan, Frances and Jeanne making landfall in either the US or Caribbean left insurers with an estimated total bill of $22.9 billion, according to the New York-based Insurance Information Institute.

A significant percentage of that bill went to Bermuda insurers and reinsurers who sell property-catastrophe insurance and reinsurance policies in Florida and surrounding states. Some of the Bermuda insurers to be hit in 2004 were ACE Limited, Alea Group, Axis Capital, Catlin Group, Endurance Specialty Holdings, IPC Re, Partner Re, PXRE, Olympus Reinsurance Co. Ltd., Renaissance Re, White Mountains Insurance Group, and XL Capital.

Although Katrina was one of the strongest storms ever to make landfall in the US, it is not expected to trigger the formation of a wave of reinsurance companies, as happened after Hurricane Andrew, industry observers said, largely because capitalisation of the market is much higher and advanced modelling techniques, used to help companies assess the chance of catastrophes in any geographic area over time, have been developed since.

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