Petrobas oil rig, sinking in the Atlantic off Brazil.

A spokesman for Swiss Re told Reuters on Friday that damage to the rig so far totaled $360 million. If the rig is totally lost, the toll could run as high as $650 million.

Jay Cohen, a Merrill Lynch insurance analyst, said: "We understand the Petrobas rig carried coverage of $500 million, plus an excess layer of $150 million for total coverage of $650 million.'' The $500 million cover is spread among 16 insurers, with only three covering more than ten percent of the risk.

"Each of these companies will likely have reinsurance for this event and we believe much of this reinsurance will be in the Lloyds and London market.'' He said companies likely to have exposure to claims included Bermuda based ACE and XL Capital, which both have operations at Lloyds. ACE said it does not have exposure to this event. But a spokesman for XL said the company has some exposure, but would not say how much.

The oil rig, one of the world's largest, was commissioned last year by Petrobas which is Brazil's state owned oil company. The 40-storey structure was in the Roncador oil field about 120 miles northeast of Rio de Janeiro in the Atlantic.

Last Thursday it was rocked by a series of explosions that left up to ten workers dead and the company has been accused of aggressive cost-cutting and using inexperienced contract workers which may have led to the accident.

The Associated Press reported yesterday that high winds and rough seas were hampering efforts to save the crippled oil rig, which sank a bit deeper into the South Atlantic.

As the platform listed and slowly sank, environmentalists worried that the 400,000 gallons (1.5 million liters) of crude oil and diesel fuel still aboard could spill into the sea.

Over the weekend, a team of navy divers, engineers and foreign consultants injected nitrogen into flooded compartments of the rig, which rose and began to right itself, Petrobras said.

But yesterday, 5-foot swells hindered rescue efforts, and the rig -- as tall as a 40-story building -- sank 16 inches, the company said. Workers were trying to inject compressed air into flotation pontoons 165 feet below the surface and seal openings so water could be sucked out with pumps and hoses.

OIL RIG THREATENS INSURERS Rig