Aspen Insurance Holdings Ltd. upped its estimate of retained losses from Hurricane Katrina and the New Orleans flood yesterday to between $325 million and $400 million after taxes with gross losses between $840 million and $925 million.

Aspen reviewed its original September 8 estimate of $150 million of retained losses after receiving preliminary indications that certain cedants? losses will exceed anticipated and even their 1 in 100 year or even 1 in 250 year loss return period calculations for US wind losses, the company said.

Chris O?Kane, chief executive officer, said: ?Hurricane Katrina, the New Orleans Flood and Hurricane Rita present unprecedented challenges for our industry and the magnitude of these is only gradually emerging. Principal amongst them will be the loss adjusting issues involved in separating storm damage from at least two separate incidences of flooding and emerging interpretive coverage issues.

?The other great challenge, if indeed certain cedants? ultimate losses do lie within the 1 in 100 year or 1 in 250 year return period range, will be for the industry to recalibrate the loss frequency and loss severity assumptions on which property insurance and reinsurance pricing are based. Aspen has considerable underwriting, actuarial and catastrophe modelling expertise at its disposal and I believe that Aspen has made considerable progress in meeting this challenge.?

Based on the range of estimated gross losses, Aspen said it will have exhausted its retrocessional outward reinsurance programme protecting its property reinsurance and specialty reinsurance lines of business. Approximately $40 million remains available under the company?s outwards reinsurance cover in relation to its offshore direct energy account and approximately $75 million remains available in relation to the company?s excess and surplus lines business written by its US subsidiary.

Aspen said that is has additional cover of up to $100 million under a fully collateralised risk transfer swap placed with a non-insurance counter-party on top of its outwards reinsurance programme. This would provide Aspen with recoveries if the level of industry losses exceeds $39 billion, with the maximum of $100 million recoverable, on a linear basis, if such industry losses reach $47 billion.

The Bermuda-based company also estimated its retained losses from Hurricane Rita between $50 million and $60 million after taxes, and gross losses between $150 million and $200 million.

Mr. O?Kane said that Aspen now plans to redesign key products and expects to be well positioned to benefit from market hardening which is already apparent.

?We anticipate that affected lines such as energy physical damage, major account property insurance and catastrophe exposed property reinsurance should experience significant price increases,? he said.

Aspen traded at $25.50 a share at market close, down $4.05 or 13.71 percent on New York Stock Exchange.