Insured losses from Hurricane Katrina could total over $50billion, consulting firm Towers Perrin said today, warning thatinsurers and society should prepare for an increased number ofnatural catastrophes.

The Stamford, Conn.-based professional services company reportestimated insured losses from Hurricane Katrina to be between $40billion and $55 billion. The figure does not include losses underthe National Flood Insurance Program but does include losses fordemand surge, cost increases incurred over the demand formaterials, and services related to cleanup and reconstruction.

The estimate also covers liability insurance claims forpollution, negligent health and nursing home care, errors andomissions by insurance agents in explaining coverage, and otherpossible actions, the firm said.

Towers Perrin said catastrophic storms are becoming morefrequent, with a $20 billion event occurring every 15 years, and aKatrina-type event coming every 50-to-100 years.

"Perhaps the most worrisome lesson from Katrina is that lossesmeasured in the tens of billions are becoming much more commonplacedue to the growth in coastal property concentrations," notedPatricia Guinn, managing director with Towers Perrin, in astatement. "All sectors of society--including insurers--mustprepare for this new reality."

For most insurers, Towers Perrin said, the loss will be anearnings event. However, rating agencies are pressuring companieswith catastrophe exposures to improve their capitalization, whichis already taking place among some insurers, the report pointedout.

Reinsurers are expected to absorb about 50 percent of the lossesfrom Katrina, more than the 25 to 35 percent they bore in 2004 whenfour hurricanes pummeled Florida, Towers Perrin noted. Directinsurers will retain most of the remainder, while the capitalmarket through catastrophe bonds and insurance derivatives willpick up 1-to-3 percent.

As others have noted, the market is expected to see selectivehardening, the report continues, especially in homeowners andcommercial property markets in the catastrophe-prone areas. Marineand energy markets should see increases, tightening of terms andconditions on commercial insurance.

Towers Perrin said it does not see immediate premium increases,but a mix of immediate and gradual depending upon the recalibrationof pricing models.

A copy of the firm's white paper on the event will be availabletomorrow at www.towersperrin.com/tillinghast after 4 p.m. EDT.

This story modified Oct. 7, 9:15 a.m., with revised datasupplied by Towers Perrin correcting their earlier figuresconcerning reinsurance losses in 2004.