Hurricane Lili hit the coast of Louisiana yesterday, bringing wind gusts of up to 90 miles an hour and heavy rainfall, which could be bad news for Bermuda's reinsurers.

Although the storm weakened to a category 2 from a category 4 on the Safir Simpson scale before making landfall, it was still expected to have caused major damage.

While it is still too early to estimate the cost of the storm to insurers, Morgan Stanley analysts Alice Schroeder, Vinay Saqi and Chris Winans said the areas most at risk were the coastal regions of Louisiana and eastern Texas.

They said: "Due to its size and potential damage, many of our companies (that the analysts follow) could potentially suffer losses, except for the brokers who do not undertake underwriting risk."

The analysts said that historically, stocks tend to trade down on hurricane news but also tend to recover once information on estimated losses become available, uncertainty subsides and companies asses the strength of their capital position.

The analysts said: "We believe it is too early to predict what the potential exposures could be at this point. We also believe that the magnitude of potential losses will be significantly influenced by the location of Lili's landfall.

The analysts also said that reinsurers with property risk included Bermuda companies ACE Ltd., IPCRe, PXRe, RennaissanceRe and XL Capital Ltd.

Although Lili was expected to cause some damage and disruption to industries in the area, the storm was downgraded to a tropical storm yesterday afternoon after blowing into Louisiana from the Gulf of Mexico, cutting a swath of destruction through the heart of Cajun country.

Lili temporarily curtailed virtually all oil production in the gulf, which provides about 25 percent of US energy.

The National Hurricane Center in Miami said in a 4 p.m. (Bermuda time) advisory that Lili's maximum sustained winds had fallen to 70 miles per hour, below the 74 mph required for hurricane status.

Earlier, wind gusts up to 92 miles per hour struck New Iberia in the heart of Cajun country 150 miles west of New Orleans.

Lili was the first hurricane to make landfall in the United States since Irene hit Florida in 1999.

President George W. Bush dispatched Joe Allbaugh, the director of the Federal Emergency Management Agency, to Louisiana and planned to declare the state a disaster area, the White House said.

Rainfall of up to 8 inches struck parts of Louisiana, including New Orleans, which was well east of the storm.

Utility company officials reported that the storm had knocked out power to at least 230,000 customers around the state.

Only last week Tropical Storm Isidore brought high winds and heavy rains to Louisiana, causing what officials said was about $100 million in damage.