NEW YORK (Bloomberg) ? Standard & Poor?s said it may cut the ratings of bonds sold by insurance companies ? including two Bermuda-based reinsurers ? that transfer to investors some of the expenses they would face from hurricanes because storms hitting the US are expected to be more devastating than forecast.

S&P is reviewing the ratings of so-called catastrophe bonds issued by Converium Holding AG, Hartford Fire Insurance Co., Swiss Reinsurance Co., USAA Casualty Insurance Co. and Bermuda-based PXRE Reinsurance Ltd. and Montpelier Reinsurance Ltd.

Ratings may be lowered by one or two levels after companies that model the risk of storm damage released data indicating that short-term risks may be greater than previously forecast, S&P said in a report today. The 2004 and 2005 hurricane seasons were more destructive than usual, and Hurricane Katrina was the most damaging storm in US history. ?S&P will use the more conservative view in rating transactions,? David Zuber, an analyst with S&P in New York, said on Friday.

Applied Insurance Research, EQE International?s EQECAT, and Risk Management Solutions, which develop models used to determine credit ratings on catastrophe bonds, recently released updated information on hurricane risk, according to S&P.

S&P said it would ask insurance companies use the updated forecasts to determine the likelihood that bondholders could see a loss of interest or principal on outstanding bonds. Bonds that may be affected by the review include various issues sold by Arbor I Ltd., Atlantic & Western Ltd., Champlain Ltd., Foundation Re Ltd., Helix 04 Ltd., and Palm Capital Ltd.

Catastrophe bonds are sold by insurance companies to reduce the risk of claims from extraordinary events such as back-to-back category-five hurricanes, floods or multiple tornadoes. They are mainly sold privately to institutions and trade infrequently.

The bonds allow insurers to skip interest and principal payments, and use proceeds from the sale, which are held in trust, to meet claims in disasters. The securities typically pay investors a higher coupon than debt with similar credit ratings. Investors have been demanding higher returns to buy catastrophe bonds.

?In terms of the forecast for greater intensity in storms, this is now being incorporated into the models that are used by both the investors and issuers,? said Dan Ozizmir, head of insurance-linked securities trading at Swiss Reinsurance Co. ?The increased frequency is priced into the structures and the investors are being rewarded for it.? Ozizmir said.