NEW YORK (Bloomberg) ? The US should cut the cost of insuring against disasters such as Hurricane Katrina and the September 11 terrorist attacks by abandoning measures that protect domestic reinsurers, said Peter Levene, chairman of Lloyd's of London, the world's biggest insurance market.

Rules that require foreign reinsurers to put up more collateral than US companies are pushing up premiums for US customers, Levene told the Downtown Association and Insurance Brokers Association of New York.

"The illogical demand for collateral based on zip code, not financial health, has helped drive up the costs of reinsurance and restricted critical capacity," Levene said today. "In the 21st century, many European reinsurers find it difficult to interpret the current rules as anything other than sheer protectionism."

A record 14 hurricanes occurred in the latest hurricane season, with Katrina, which flooded most of New Orleans in August, costing as much as $60 billion in insured losses. Lloyds may have to meet claims of about $2 billion, Levene said in September.

The US requires foreign reinsurers to post collateral equal to 100 percent of their gross liabilities to US companies, Levene said. It is "imperative" that the rules are reformed to allow foreign companies to lend more support in the event of another major disaster such as Katrina, he said.

"Neither effective nor efficient, the current rules distort the operation of the US insurance market, leaving US customers as the biggest losers." Levene added.