There is a “plus” – if there can be such a thing – for the insurance industry in all this chaos. Insurance premiums, already rising quickly in a hardening market, will be propelled by the New York disaster aftermath to greater heights. They’ll have to, because affected reinsurers in particular are going to be clawing back their losses at the same time as they rebuild their capital reserves. They are only going to be attractive to the capital markets if they are delivering solid returns quickly. As spooked investors flee the equity markets, insurer’s ability to make money from investments – and attract investors – will be severely compromised. The price of risk cover will have to rise.

Ratings agency Fitch predicted last week that between 12 and 17 US insurers with New York exposures will be placed on S&P’s negative credit watch. Hardly unexpected, but it will force the companies to increase their premiums substantially to regain their vital financial strength ratings as well as pay for the stratospheric reinsurance rises that are being predicted.

Those rises will flow quickly into the Australian market, according to industry sources. Local brokers may be in for a tough time again as they tell their clients to expect even substantially higher premiums than they’ve experienced in the past couple of years.

We’ll keep you posted as details emerge.