Local insurers held their breath when Hurricane Katrina ripped through the Gulf of Mexico almost a month ago – and it appears their concerns were warranted. It’s likely reinsurers will raise rates to recover some of the industry’s $US40-60 billion in Katrina-related losses.

While few local insurers were directly affected by insured losses, industry insiders say the rise in international reinsurance rates will logically lead to premium rises in the local market.

Commercial property is likely to be the class most substantially affected by the rate increases.

“Any rate reductions the industry saw in the past 12 months have been short-lived and could well be eroded by Hurricane Katrina,” one industry leader told Sunrise Exchange News. “Reinsurers won’t be messing around with pricing – and they will be wanting to recover as much as possible through rate increases.”

Credit Suisse First Boston said in a report that Hurricane Katrina will result in “significant premium rate increases” all over the world.

“Commentary from most major reinsurers and insurers see the impact of Hurricane Katrina as having a transforming impact,” the report said. “Expect at least reasonable rate rises.”