Hurricanes Katrina and Rita have prompted Standard & Poor'sto revise its global reinsurance outlook to negative fromstable.

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But the same events have led equity analysts at Morgan Stanleyto upgrade the primary and secondary insurance industries fromin-line to attractive.

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S&P credit analyst Simon Marshall said the negative outlookreflects the near-term strains Katrina losses will impose on theindustry.

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"It also reflects the uncertainties that necessarily surroundthe companies' estimations of the effect of an event of Katrina'ssize and type," Mr. Marshall said.

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The number of downgrades may be greater than expected ifreinsurers' loss estimates for Katrina prove inadequate, or ifadditional material catastrophic events occur in the coming months,Mr. Marshall added.

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Both S&P and Morgan Stanley agree that the two Gulfhurricanes are likely to ensure continuation of the hard market inthe property-casualty sector.

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Analyst William Wilt at Morgan Stanley said that as a result ofthe uncertainty surrounding Katrina and Rita "the key ingredientsof a cyclical upturn have fallen into place."

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"Our increasing conviction that Katrina loss estimates willcarry substantial variability for the next year or more suggests tous insurers will exercise pricing restraint in the period ahead,"Mr. Wilt said.

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