Analysts have been predicting it for weeks, and finally it’s happened: ratings agencies are downgrading their outlooks for the industry due to the losses from Hurricane Katrina.

Standard & Poor’s (S&P) has revised its outlook for the global reinsurance industry from stable to negative. It says Hurricane Katrina and to a lesser extent Hurricane Rita are to blame.

S&P says the outlook reflects the “near-term strain on financial strength… of the most expensive loss in the industry’s history. It also reflects the uncertainties that necessarily surround the companies’ estimations of the effect of an event of Katrina’s size and type.”

The agency says it will revise the negative outlook when the impact of the disaster becomes clearer. But it warns downgrades may be greater than expected if reinsurers’ loss estimates for Katrina prove inadequate or if additional material catastrophic events occur in the coming months. “Financial flexibility could become a key factor in this.”