Increased capacity proposed for the Florida HurricaneCatastrophe Fund cannot be expected to have much impact onreinsurance pricing, according to a banking firm's analysis.

Bank of America Securities reinsurance analyst Tamara Kravecsaid the current proposed addition of $14 billion to the FHCF couldlead to some reductions for accounts that saw some of the mostspectacular increases in 2006.

"Some volume written by the private market in 2005 may go intothe cat fund, but we expect even with these changes, mostreinsurers will be able to write as much business as they like,"Ms. Kravec wrote.

In addition, the new cat fund capacity rates will be on par withthe rates private insurers charged in 2006.

The Property And Casualty Insurance Reform Committee, set up byGov. Jeb Bush in May, issued a series of proposals Friday thatinclude adding the capacity to the FHCF for two years.

The proposal would add capacity for residential property bothbelow the FHCF's current retention and above the top of the currentlimit. Additionally, it would provide about $6 billion of coveragefor commercial risks.

Ms. Kravec said the proposal faces an uncertain future becauseof the increased risk the state will incur as a result.

Nonetheless, the fact that the private market cannot meet thedemand for reinsurance would indicate a minimal impact onpricing.

"The additional cat fund capacity would not necessarily displacethe private reinsurance market, but rather provide coverage theprivate market cannot currently provide," Ms. Kravec wrote.

In addition, other factors that came into play last yearseparate from capacity issues also increased pricing.

Revised catastrophe models producing higher loss estimates andincreased capital requirements by ratings agencies are among suchitems that will continue to buttress industry pricing, shewrote.