Hurricanes Could Boost Oil Rig Reinsurance Cost

"It is inevitable that there will be some discussion about these risks from hurricanes," he said, "but it is an obvious factor to [insurers] and they have based their pricing on this occurring now and then."

Mr. Jeffers said Ivan has probably put a halt to the softening in this market that it has seen for the past couple of years, and "that downward momentum has stopped, for the time being."

The real test won't come until renewals at the beginning of the year, he said.

Mr. Jeffers opined that Ivan was not as bad as many had feared it could be, though it did damage platforms, rigs and some pipelines.

The oil and gas industry is just beginning to assess underwater damage, he said, and is discovering more extensive damage as it makes its surveys. It could be at least a year before claims adjusters are able to get a full understanding of how extensive the damage is.

One thing that is hindering damage assessment, he said, is the availability of submersible vehicles to go in and survey the damage.

"They are a little tapped out right now, understandably," Mr. Jeffers observed.

He said industry damage estimates are running between $600 million and $1 billion in terms of property damage and does not include claims for business interruption.

"The numbers vary pretty widely depending on who you talk to," he said.

One oil and gas exploration and development company, Magnum Hunter Resources Inc., in Irving, Texas, said it expected total capital outlays to amount to less than $500,000. The company said it would be less than the corporation's current insurance deductible.

Loss results from the four hurricanes continued to arrive with White Mountains Insurance Group, Ltd., based in Hamilton, Bermuda, reporting today that Ivan would cost the company $35 million from its insurance and reinsurance operations.

Friday, St. Paul Travelers Companies Inc., headquartered in St. Paul, Minn., said its losses from Hurricane Frances would be approximately $75 million, after tax and reinsurance. By line, the company said commercial lines would be hit with an approximate charge of $30 million; specialty lines would see about $21 million; and personal lines approximately $24 million.

These estimates, combined with losses from Charley, would result in the company's per share earnings for 2004 being reduced by approximately 31 cents, the carrier said. Losses from Ivan were not available.