Hurricanes Katrina and Rita will cause premium increases forreinsurance that could be equal to those insurers saw after 9-11,but it remains too early to tell how high they will go, a ratingagency analyst said.

That forecast came from Damien Margarelli during a conferencecall held today by Standard & Poor's concerning theramifications of Hurricanes Katrina and Rita on the insuranceindustry.

In response to a question on premium increases, Mr. Margarellisaid that while it is too early to say for certain how much theincrease will be, past historical events could be an indicator.

He noted that in the aftermath of the World Trade Centerindustry loss of more than $20 billion, reinsurance premiums rose100 percent or more.

In Florida, however, after hurricanes swept through the statelast year, rate increases were between 20- and 25 percent. He saidthe losses from Katrina would mean increases above the 20-to-25percent mark, but S&P is not certain the increases wouldapproach 9-11 numbers.

Simon Marshall, a credit analyst for S&P, said the pressureson the reinsurance industry from the hurricane losses would likelyinduce a hard market in that sector. Increased frequency of largeloss events, the ability to raise new capital, availability andaffordability of retrocession coverage, and difficulty to modelcatastrophe events are some of the concerns that have lead to anegative outlook in this sector.

Downgrades, he said, may result if there are more loss events orestimates are off. However, strong performance could result in astable outlook later on.

Mr. Margarelli, further discussing global reinsurance, said thecombination of the hurricanes striking the U.S. and the recordnumber of typhoons hitting Japan "has surprised the industry."

"The key issue is whether the industry can increasepremiums...to charge for the increasing probability of higherlosses," he said.

In the personal lines area, Polina Chernyak, an S&P analyst,said increases are expected to be regional in nature and could runanywhere from 10-to-30 percent, especially in Louisiana andMississippi.

On the commercial side, John Iten said commercial property wouldsee a hard market as a result of the hurricanes, after significantsoftening.

Mr. Iten would not speculate on how much the increase would be,but said the hardening would be better if it were national insteadof regional.

S&P analysts said, while most carriers will be able toabsorb losses from the two storms, it has put 13 companies onCredit Watch. The 13 will need to recapitalize their losses throughinvestors, and analysts said they have not seen any indicationsthat the carriers will have problems doing so.

One of the carriers, Montpelier Re Holdings Ltd., is to beremoved after obtaining $600 million in recapitalization.

Today, Oil Insurance Ltd., which is on S&P's Credit Watch,had its long-term counterparty credit and financial strength ratinglowered to "A-minus" from "A-plus."

PXRE Corp., also on Credit Watch, suffered the same lowering onPXRE Reinsurance Ltd. and PXRE Reinsurance Co. The company said itplans to raise $475 million through investors.

A.M. Best also issued a series of downgrades to the company,lowering PXRE Group financial strength rating from "A (Excellent)"to "A-minus (Excellent)," and its issuer credit rating from "a" to"a-minus." The downgrade also affects other segments of thecompany. The rating remains under review with negativeimplications.

The other companies on Credit Watch include:

o ACE Ltd.

o Allmerica Financial Corp.

o Allstate Corp.

o Society of Lloyd's

o State Farm Mutual Automobile Insurance Co.

o Swiss Reinsurance Co.

o United Fire Group

o XL Capital Group

o Transatlantic Reinsurance Co.

o IPCRe Ltd.

In other hurricane-related news, Hamilton, Bermuda-based WhiteMountains Insurance Group, Ltd., said its losses from HurricaneRita would be less than $25 million pretax. With Katrina, total netlosses are estimated to be between $175 million and $325 million,or $115-to-$215 millon after taxes.