Insurers and reinsurers around the world were last night braced for the worst ever insured natural catastrophe, as experts said Hurricane Katrina could cost them as much as $25 billion (€20.5 billion).
The oil industry, both through offshore rigs and onshore refining facilities, was likely to generate the biggest losses, with the tourism sector and residential housing also set to be hit hard.
Hurricane Andrew became the most expensive natural catastrophe in history when it hit Florida in 1992, causing $30 billion of damage, though only $17 billion of that was insured, according to Munich Re, the world's biggest reinsurer.
The September 11th, 2001 terrorist attacks cost an estimated $30 billion. Munich Re said last year's hurricanes - Charley, Ivan, Frances and Jeanne - among them cost the industry $35 billion.
Eqecat, a storm modelling specialist, estimated that Katrina would cost insurers $15-$30 billion, excluding oil rig damage, depending on the course the storm took. An initial estimate from Risk Management Solutions, another modelling company, put the range at $10-$25 billion.
But reinsurers, including Munich Re, Swiss Re, the world number two, and Hannover Re, number four, said yesterday it would take at least another 24 hours to come up with estimates of their individual exposures.
Reinsurance groups specialising in natural catastrophe coverage, such as the Bermuda-based groups Ace, XL and Partner Re, are set to be among the worst affected.
Among primary insurers, State Farm, mutually owned, has the biggest primary exposure in Louisiana, with a market share of more than 27 per cent, according to Brian Meredith, analyst at Banc of America Securities. The publicly traded Allstate, whose profits were all but wiped out by last year's hurricanes, is the second biggest with a 16 per cent share of business in the region, while St Paul Travelers has 7 per cent market share.
The scale of the losses from the hurricane could push up premiums for natural catastrophe insurance further. But it will not be big enough to reverse the cyclical downturn in overall property and casualty pricing, analysts said.
