Standard & Poor's Ratings Services said today it willmaintain its negative outlook for the global reinsurance sector dueto the catastrophic hurricanes of 2005.

"The outlook reflects near-term strains on reinsurers' financialstrength, after 2005 saw the largest catastrophe losses in theindustry's history," said Standard & Poor's credit analystLaline Carvalho. "The outlook also indicates that there will beslightly more downgrades than upgrades among rated entities in thenear term."

In an article titled "Global Reinsurance 2006 Outlook: VolatileEarnings And Near-Term Capital Strain Dog Sector," S&P said themajor hurricanes hitting North America in 2005, Katrina, Rita, andWilma, caused an aggregate loss between $70 billion and $90 billionfor primary and reinsurance companies.

Reinsurers, the agency noted, will be liable for a large portionof those losses, which could strain some companies' financialresources. Additionally, S&P said it also has concernsregarding how much coverage companies will write, pricing, and thepotential for negative consequences on reserves due to the 2005hurricanes.

Although five companies have been downgraded by S&P inrecent months, most reinsurers rated in the 'A' or 'AA' categories.The agency's negative outlook on the industry is counterbalancedsomewhat by its expectations of higher pricing in 2006, continuedsupport of the industry by the capital markets, and majorenhancements in the modeling and risk management tools utilized byreinsurers.

S&P said it will reevaluate the industry after the impact ofthe key Jan. 1 renewal period in 2006, and after it has resolvedthe status of several individual issuers currently on CreditWatchwith negative implications. If companies do not suffer anyunexpected substantial losses in 2006, S&P said it believes thereinsurance industry's operating results could improve"substantially" next year.