Major US insurers are beginning to scale down their exposures in the devastated gulf states, especially in the city of New Orleans. State Farm has announced it will cut back on coverage, as will rival insurer Allstate, which is dealing with claims worth $US1.5 billion ($2.04 billion). The two insurers insure about 50% of Louisiana between them.

Louisiana Insurance Commissioner Robert Wooley told local media the situation is better than after Hurricane Andrew in 1992, when many insurers walked away from business in Miami.

“I think insurance companies will be able to continue to write here,” he said. And he’s not worried about the two giants pulling back, either. “Having two insurance companies insure such a large percentage does not benefit the consumer. Having more companies creates a more competitive environment.”

Independent Insurance Agents and Brokers of America CEO Robert Rusboldt says insurance companies will be “skittish” about dealing with risks in the region. “But I don’t foresee renewals being a problem.”