While the damage bill from Hurricane Isabel has been cut from $5.8 billion down to around $1.4 billion, the storm and other more potentially damaging storms are going to put a strain on many insurers, according to AIG Vice Chairman and COO Martin Sullivan.

The hurricane hit the US mid-Atlantic coast last weak, causing extensive flood damage. The US Government will pick up this part of the damage bill. Munich Re says it will only be out of pocket by less than $147 million, and most claims will be met by the eight insurers which hold 73% of the domestic insurance market along the US eastern seaboard.

But the potential scale of the losses has led Mr Sullivan – often tipped to succeed legendary Chairman and CEO Maurice "Hank" Greenberg – to warn of the impact on insurers. He told an insurers’ meeting in London that the global insurance industry is struggling. “Many insurers and reinsurers are either falling, scrambling to raise capital, suffering credit rating downgrades or withdrawing from markets,” he said.

Companies have struggled to deal with big losses on their investments while playing multi-billion dollar claims, such as the World Trade Centre. “Weak companies that cut rates to attract and retain business will be tomorrow’s casualties,” Mr Sullivan said. “There is no doubt about that.”