Allied World Assurance Company Holdings says it expects $40million of drought-related crop reinsurance losses and expenses forthe third quarter.

The Zug, Switzerland-based specialty insurance and reinsuranceprovider says investors can also expect to see the company bookbetween $5 million and $10 million in losses from HurricaneIsaac.

The amounts are pretax and net of reinsurance recoverables, saysAllied World, which adds that the third-quarter crop losses are inaddition to the company's anticipated losses and loss expenses forthis line of business prior to the severe drought that gripped theMidwest this year.

Final loss totals on Allied's crop reinsurance book can besignificantly impacted by finalized yield tallies and commodityprice levels, the company says.

Allied says its estimates for these events are derived frompreliminary information from clients and brokers, a review of theterms of in-force policies and contracts, a review of outwardreinsurance agreements and from its crop and catastrophe modelinganalyses.

Catastrophe modeler AIR Worldwide has predicted a gross lossratio for the industry of 120-180 percent while estimating losses of between $13 billion and $20 billion from farmerclaims.

Standard & Poor's says insured crop losses could costinsurers and reinsurers more than $5 billion, but losses will be manageable andcontained to the third quarter, for the most part.

A report released by Milliman predicted underwriting losses of$2.8 billion for 12 major corn and soybean producingstates.

Other insurers in the industry have talked of crop-relatedlosses. Evan Greenberg, CEO of Ace, said during a conference callon second-quarter earnings that the company's best guess forthird-quarter crop losses was nearly $70 million.

At the end of July, American Financial Group dropped its earnings guidance over potential losses in itscrop-insurance line after the company performed stress tests on itskey premium states.