Bermuda reinsurance executive Patrick Thiele said the industry shouldn't step in to meet flood claims from policyholders in storm ravaged New Orleans if the coverage was excluded.

Mr. Thiele, chief executive of Bermudian reinsurer PartnerRe told Reactions those calling for insurers to foot the bill may not have considered the consequences.

"The industry did not model this risk into its coverage or its pricing.

"If we suddenly find we are exposed to flood risk that changes many things," he said.

"The risk would need to be assessed. We would have to invest in risk models. And the most obvious consequence would be increases in the price of insurance," which would hit policyholders the hardest, he said. "Policyholders are not going to be happy if their premiums increase as a result of this."

After the September 11 terrorist attacks in the US, insurers and reinsurers could have backed away from paying claims because most policies don't cover acts of war or terrorism.

The industry didn't do this, but Mr. Thiele said Katrina was a different scenario because there federal backstop FEMA is there to meet flood damage claims.

Most commercial and individual insurance policies exclude flood damages, although special coverage can be purchased. Only high-end properties usually do so.

An estimate from risk modeler Risk Management Solutions on Friday put expected Katrina and flood claims in the $40 billion to $60 billion range, with $15 billion to $25 billion of that estimate arising from flood damage.

"It was clearly not covered and it is the state's job to deal with this," Mr. Thiele said. He added that it makes no sense for shareholders in the insurance industry to pay for this loss. "The legal system should uphold the integrity of the insurance contract."

Mr. Thiele said PartnerRe will benefit from anticipated insurance rate increases, but it will not be committing more capital to writing property-catastrophe business.

"We don't believe in betting the farm or using too high a percentage of our capital on anything. We set limits of the exposure we will take to any particular event and we stick to them."

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