Mounting insurance losses from last year's hurricane season are sparking the concern of a leading ratings agency ? but not to the point that it plans to issue any punishing downgrades.

Questions on how much the events will finally cost the industry were raised in a special report released yesterday by Standard & Poor's.

Five months on from the unprecedented activity of the 2004 hurricane season when four violent storms tore through the Caribbean and several US states, the grand total for claims is still unknown.

The high cost of the storms was said by S&P to be taking a real chunk from the shareholders' equity of the firms impacted, but said it did not plan any ratings action because of steeply revised estimates.

"Although Standard & Poor's has not changed ratings or outlooks on these companies as a result, this does highlight a somewhat less conservative approach by these companies," Damien Magarelli, a credit analyst at Standard & Poor's Ratings Services, said.

Not only is the balance of insurance claims not clear, insurers have revised loss estimates up by billions of dollars over initial predictions, said a concerned S&P. The alarming growth of loss estimates was attributed by S&P analysts to insurers and reinsurers initially underestimating their exposure to the catastrophes as well as being unprepared with reinsurance coverage for more than one event.

Among the many companies affected are a number of re/insurers either based in Bermuda or with a significant presence here, including American International Group Inc., Everest Re Group Ltd., IPC Holdings Ltd., RenaissanceRe Holdings Ltd., XL Capital Ltd., and Zurich.

Nearing the head of the pack is Renaissance Re with initial estimates for losses advancing 22.4 percent from an initial $425 million to $520 million.

S&P cited this as a "steep restatement" equivalent to 21.2 percent of shareholders' equity.

AIG saw a similarly large restatement revising its first estimate of $512.2 million in exposure to the storms up 24.8 percent to $639.1 million.

However, as a percentage of shareholders' equity S&P showed it was less than one percent of the $78.9 billion in AIG investor assets.

XL Capital also moved up its third quarter hurricane loss estimate, increasing it 16 percent to $520 million from $446 million.

Company management releasing a fourth quarter and year-end earnings report last week said the company had seen $550 million in after-tax losses from catastrophes last year.

Meanwhile, Everest Re's estimate grew a whopping 70 percent from $190 million to $323 million while IPC Re's first figure of $116 million was made 50 percent higher at $176 million.

Although not mentioned in the S&P report, another Bermuda-based company to revise its storm estimate was Montpelier Re saying on Wednesday night that losses were expected to be 16.9 percent higher, or $34.7 million more at $239.7 million.

More restatements are expected.

Insurers are not the only ones to have trouble estimating the financial extent of storm damage. Multi-billion-dollar discrepancies remain between estimates of the ultimate catastrophe losses announced by Swiss Re sigma and industry bodies such as the Insurance Services Office.

So far, estimates of the damage done by the 2004 hurricane season are far and wide. Renaissance Re's estimates were said to assume a $30 billion total insured estimate while Swiss Re sigma estimated insured claims at $27 billion and ISO estimated US property/casualty insurers' claims above $21 billion.

Mr. Magarelli said this highlighted the dilemma that many companies face as they are forced to restate their original estimates. "The estimates in some cases were significantly low," he said.

On the reinsurance side, S&P said in its report: "Many insurers neglected to reinsure themselves for the risk that more than one hurricane could cause this much damage to a single US state. Most primary insurers had only one reinstatement provision with their reinsurers.

"In this case, the primary insurance companies were reinstating, or purchasing more reinsurance, for the second hurricane, Frances.

"But the 2004 storm season departed from the norm in which more than one hurricane rarely makes landfall in a single state. Instead, four hurricanes made landfall, and they all caused damage to Florida.

"So some primary insurers attempted to obtain additional reinsurance in the midst of the hurricane season."

It concluded that discrepancies between estimates and the lack of reinsurance coverage stemmed from modelling issues and practical obstacles to gathering accurate information in a high-frequency storm season.

"Although improved methods for modelling hurricane risk have been developed, primary insurers still grapple with their ability to estimate claims in a high-frequency scenario. At the very least insurers need to reassess their reinsurance needs," the agency said.

"Still more work needs to be done," concluded Thomas Upton, S&P property/casualty ratings team leader.