Reinsurers will be poring over the fine print in contracts they inked earlier in the year with insurers who sell hurricane policies to Gulf Coast property owners.

The scrutiny will look at whether insurers have met contractual obligations including if Katrina claims are submitted within the time specified in the contract, said a London-based lawyer who advises insurers and reinsurers.

James Pilgrim-Morris, special counsel in the London office of Sedgwick, Detert, Moran and Arnold LLP, told an industry audience that insurers selling policies in the four states that sustained damage from the powerful August 29 storm could pay claims even in areas that were excluded from contracts.

?There is a risk political pressures will force them to pay,? he said. Politics, and even potential legislative actions, could see insurers ?glossing? over contract exclusions, like flood damage.

Authorities in one state, Mississippi, are already travelling legal avenues to force five large insurers to pay flood claims, despite this kind of water damage being excluded from most home policies.

Katrina, a deadly category five storm that wreaked havoc across large patches of Mississippi, Louisiana, and parts of Georgia and Alabama, is expected to be the most costly insurance event ever with a price tag of up to $60 billion. The total economic loss is estimated to be around $125 billion.

The insured loss is lower than the total because only a portion of the property owners now having to repair and rebuild their homes bought insurance policies for storm damage. Fewer still will have had policies covering flood damage. Yesterday Mr. Pilgrim-James said pressures on insurers will ?ultimately lead to reinsurance issues?.

Reinsurers effectively sell insurance to insurers by contracting to take on some of the risk of losses in policies insurers sell to individuals and companies.

While insurers governed by state laws could cave under political pressures, signs are that reinsurers, who are not governed by state laws, could put up more fight.

Some reinsurance executives have called for flood claims to be turned down. And Mr. Pilgrim-James believes finer points, like if the claim was submitted properly, and within time, will be taken into account. Claims that don?t follow the letter of the contract could be denied, he said.

UK reinsurers that take that stance could find an ally in the English Commercial Court. Mr. Pilgrim-James said English judges hearing commercial matters tend toward a ?black and white? approach of upholding the contract.

Mr. Pilgrim-Morris said Bermuda-based reinsurers will likely face similar decisions because of the Island having an English system of law.

London reinsurers had sizeable exposure to Katrina, as did Bermuda reinsurers. As a whole, the Bermuda insurers and reinsurers are expected to pay up to $10 billion in Katrina claims.

Reinsurers will pay a large portion of the bill because Katrina, as one event, will only have one deductible. A wave of four strong hurricanes last year saw insurers foot more of the total $23 billion bill because they had to pay a deductibles for each of the claims they submitted from the four storms.

Sedgwick, a law firm with offices in the US, UK and Europe has a dedicated insurance practice offering counsel in all areas of insurance law. It holds its Hot Topics Seminar in Bermuda each year. The event was co-sponsored by accounting firm PricewaterhouseCoopers this year.