NEW YORK (Bloomberg) - American International Group Inc. Chief Executive Officer Martin Sullivan said insurers, battered by Hurricane Katrina's devastation in the Gulf of Mexico last month, are raising commercial property rates around the world.

"We are already seeing rate increases being proposed in the property, energy -- on and offshore -- and the marine areas," Sullivan said yesterday in an interview in New York. "The increases have not filtered into other lines of business. That's not to say they won't."

Katrina, estimated to be the most costly disaster in the industry's history, is triggering widespread price increases following more than a year of declines, said Sullivan, who runs the world's largest insurer. Analysts haven't quantified expected rate gains and neither did Sullivan. After a record four hurricanes in Florida last year, property rates rose only in the damaged regions.

Insured losses from Katrina may reach $40 billion to $60 billion and Hurricane Rita, which hit Louisiana and Texas last week, may spur $4 billion to $7 billion in claims, according to Newark, California-based Risk Management Solutions Inc., which uses computers to estimate storm damages.

AIG expects Katrina to cost the company about $1.1 billion, or roughly 1 percent of shareholders equity. It hasn't put an estimate on Rita. Munich Re, the world's biggest reinsurer, today said its damages from Katrina may be 1.1 billion euros ($1.3 billion), more than double the original estimate. Claims from Rita may reach about 230 million euros.

`Catalyst for Pricing'

"An event like this provides a catalyst for pricing," said Cathy Siefert, an analyst at Standard & Poor's in New York, who has a "buy" rating on AIG's stock. "AIG's Katrina losses are manageable relative to their capital base. They are well positioned to benefit."

All told, storms this year may deplete about 17 percent of the $402 billion in surplus that U.S. property and casualty insurers have for unexpectedly high claims, Fitch Ratings estimates.

Commercial insurance rates fell by an average 9.7 percent in the second quarter, before the hurricanes, a survey by the Council of Insurance Agents and Brokers showed. Rates rose as much as 30 percent in a quarter following the terrorist attacks of Sept. 11, 2001, which destroyed New York's World Trade Center.

`Open Dialogue'

In an hour-long interview at AIG's headquarters, Sullivan, 51, said Katrina is among the challenges he's faced since replacing Maurice Greenberg in March as CEO. The former chief operating officer took over amid a regulatory probe of reinsurance accounting that has since prompted AIG to lower net income from the past five years by $3.9 billion, or 10 percent.

"We want a very open and constructive dialogue and that is what we are having," Sullivan said of the company's cooperation with regulators. AIG is seeking to settle a suit from New York Attorney General Eliot Spitzer and other probes "as quickly as possible," he said.

Shares of AIG are down 17 percent since February when the company disclosed that it had received subpoenas. The insurer, depicted by Spitzer as a "black box" under Greenberg's reign, blamed the restatement on former senior executives. Sullivan, who plans to meet later today with investors, declined to comment on his contact with Greenberg.

"I'm a pretty open guy," said Sullivan, describing himself as a "hands-on manager" willing to visit the company's mailroom or ask for help.

"At the end of the day, we will be judged ultimately on the earnings we produce," Sullivan said, who joined AIG in the U.K. as a file clerk in 1971. "If there is somebody out there that has a better understanding or knowledge of an issue, then I will ask for his or her input."