"Perhaps the most worrisome lesson from Katrina is that losses measured in the tens of billions are becoming much more commonplace due to the growth in coastal property concentrations," noted Patricia Guinn, managing director with Towers Perrin, in a statement. "All sectors of society--including insurers--must prepare for this new reality."

For most insurers, Towers Perrin said, the loss will be an earnings event. However, rating agencies are pressuring companies with catastrophe exposures to improve their capitalization, which is already taking place among some insurers, the report pointed out.

Reinsurers are expected to absorb about 50 percent of the losses from Katrina, more than the 25 to 35 percent they bore in 2004 when four hurricanes pummeled Florida, Towers Perrin noted. Direct insurers will retain most of the remainder, while the capital market through catastrophe bonds and insurance derivatives will pick up 1-to-3 percent.

As others have noted, the market is expected to see selective hardening, the report continues, especially in homeowners and commercial property markets in the catastrophe-prone areas. Marine and energy markets should see increases, tightening of terms and conditions on commercial insurance.

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

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

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