NEW YORK (Bloomberg) ? Insurers are reducing the amount of coverage they provide to companies at risk from natural disasters after last year's record hurricane season caused $57.3 billion in insured damages.

The amount of natural-catastrophe insurance available to US companies has declined by an average 15 percent to 20 percent from a year ago, said Aaron Davis, director of the national property practice at Chicago-based Aon Corp., the world's number two insurance broker. The decline is more severe for companies with property in hurricane-prone areas, he said.

American International Group Inc., the world's biggest insurer, and Zurich Financial Services AG had some of the biggest losses from last year's storms and decreased their potential payouts by as much as 25 percent this year. Wal-Mart Stores Inc., the world's largest retailer, said in May it would insure itself against hurricanes rather than pay higher rates.

"Many big companies are getting half the limit they purchased before, or less, and also experiencing triple-digit premium increases," said Robert Howe, head of the global property practice at New York-based Marsh & McLennan Cos., the largest insurance broker. "It's cutting across all of American business with catastrophe exposure."

Hurricanes Katrina, Rita and Wilma, three storms that pummelled the southeastern US last year, caused rating agencies to toughen their standards, forcing some insurers to limit their policy sales. Predictions of more frequent and expensive storms also helped drive up prices and shrink the amount of coverage available, Aon's Davis said.

Zurich North America, a unit of Switzerland's Zurich Financial, cut its overall maximum probable loss from windstorms by about 18 percent since the beginning of the year, in part by reducing coverage, said Dan Loris, Zurich's senior vice president of property in Schaumburg, Illinois. New York-based AIG said in March it has been shrinking coverage limits, or its maximum payout on policies, by 20 percent to 25 percent in catastrophe- exposed areas.

"The primary driver is profitability," said Chris Winans, a spokesman for AIG. "We have to protect the bottom line in the wake of major hits."

Reinsurance, which insurers use to transfer some of their risk, is in short supply, further limiting what AIG can sell, he said. "It's 40 percent light compared to the demand," said Winans.

Before Katrina, Omni Hotels Corp. had more than $100 million of storm insurance from AIG, Zurich Financial and other insurers to protect its 39 hotels in North America. That coverage has since dropped by 95 percent, said Mary Lynn Bangs, director of risk management at the Irving, Texas-based company.

"If there's a substantial hurricane, I can't imagine our limit not being exhausted," she said. Omni's two New Orleans hotels had $23.5 million in Katrina claims.

Wal-Mart said in a statement that insurance policies offered this year were "substantially more limited and higher priced." If Wal-Mart had been required to pay for its 2004 and 2005 hurricane claims, earnings per share would have been reduced by 2 cents and 4 cents, respectively, the Bentonville, Arkansas-based company said.

Insurers learned from Katrina that their forecasts underestimated the effect of "secondary-loss factors," such as blackouts, looting and other civil disturbances that can occur after a disaster, said Loris of Zurich.

New Orleans, a city of a half-million people, descended into chaos after Hurricane Katrina broke down a system of levees and the city was flooded. Thousands of people were evacuated and hundreds of police officers resigned their posts. National Guard troops were called in to combat theft and quell gunfire.

"The model didn't respond well to that kind of scenario," Loris said.

To account for the changed expectations, prices for earthquake coverage have also climbed, said Loris, even though there hasn't been a major US quake since 1994, when southern California was left with $12.5 billion of insured losses.

Smart & Final Inc., a chain of 250 warehouse grocery stores, renewed its property policy on July 1 and is paying twice as much for half the coverage, said Jan Berger, vice president and treasurer of the Commerce, California-based company. All of Smart & Final's stores are in the western part of the US and Mexico, with 178 in California.

"It's very difficult to swallow," Berger said. "This was a good-sized expense for the company."

Omni, which has hotels in Los Angeles, San Diego and San Francisco, saw its earthquake rates from AIG's Lexington Insurance Co. unit more than double, Bangs said. They were unchanged or down in 2005.

"Don't make me pay three times for earthquake coverage when it was wind that caused the problem," Bangs said.

"The catastrophe models that we use as part of our rate-determination process have changed in a way that indicates more rate is needed," said AIG's Winans.

Of Omni's two New Orleans hotels, the Royal Orleans in the French Quarter emerged from Katrina relatively unscathed. It housed the local police precinct in the days after the storm and later, government contractors, Bangs said. The Royal Crescent in the central business district lost part of its roof and almost three full floors were destroyed by mold. The hotel hasn't reopened.

"It's been a tough one," said Bangs. None of Omni's insurance claims have been turned down, she said.

Lexington, Omni's longtime insurer, is charging four times last year's premium for five percent of the windstorm coverage provided by a combination of insurers last year, Bangs said.

AIG's Winans said the company doesn't comment on specific policyholders' terms and conditions. Lexington, AIG's biggest commercial property unit, said in June it was raising prices by an average of 50 percent.