Consumers will see insurance policy prices rise in the next year as a result of Hurricane Katrina, according to domestic insurance market executives.

Insurers that sell home, boat and health policies locally are bracing to pay higher reinsurance costs when they renew policies on January 1, based on expectations that Katrina's mounting price tag will result in higher reinsurance costs which will have to be passed to consumers.

Bob Anderson, executive vice president for the property and casualty division of Bermuda's largest property insurer Argus Group, said yesterday the price put on insurance policies will rise around the world, including Bermuda.

"No community, no matter how strong, can expect to pay out $60 billion, possibly more, and not get it back from somewhere," he said.

While New Orleans is more than 2,000 miles from Bermuda, the expensive cost of fixing damage across the Gulf Coast region from the devastating August 29 hurricane is something consumers around the world will have to shoulder, said Mr. Anderson.

"It can only come back from the insurance premiums that we all pay," he said in an interview with The Royal Gazette.

The last time a major world event had this kind of major ripple effect on global insurance rates was following the September 11 terrorist attacks, after insurers and reinsurers had to settle an estimated bill of $33 billion.

Argus chief executive Gerald Simons said the group's health reinsurer called him after 9/11 to say it was putting up its rates because of concerns about the cost of premature births.

It is hard to imagine why the cost of care for an early-born baby should go up after a terrorist attack, but Mr. Simons said billions of dollars in losses caused reinsurers selling all kinds of policies to look at where they could be over-exposed and to adjust premium pricing.

"The losses of the few have to be paid by the premiums of many," he said.

Reinsurers and insurers were basically unprepared for 9/11 claims because terrorism coverage was written into most policies on a more or less gratis basis.

While a natural catastrophe, Katrina, and the ensuing flooding in and around New Orleans, is expected to cost almost twice what the 9/11 attacks did, making it the costliest ever insurance event with insurers and reinsurers expected to pay claims in the region of $60 billion.

"The best guess now is that Katrina will cost something of the order of $60 billion plus," Mr. Anderson said, predicting a final tally may not be known until into 2006.

He said the $60 billion estimate was "only likely to go up, in my personal view".

Reinsurers sell insurance policies to insurers to help take some of the risk in policies insurers sell to individuals and corporations.

Because reinsurers are expected to pay out a large portion of the Katrina claims received by insurers, reinsurance rates are expected to rise.

Both of the Island's two largest domestic insurers ? Argus Group and BF&M Insurance ? use reinsurance to help protect them from having to bear the full cost of claims.

Argus doesn't disclose how much reinsurance it buys but Mr. Anderson did say that the $22 million in losses the company sustained in 2003 from Hurricane Fabian were partly absorbed by reinsurance.

"Reinsurance companies came to our aid, and we are still paying them back?"

John Wight, chief executive of BF&M, said his company would be influenced by rising reinsurance rates but he expected only "moderate" increases would have to be passed on to consumers.

However, Mr. Wight said rates could see more significant rate increases if there were more costly catastrophes before the end of the year ? a pressing concern with Hurricane Rita already having swept the Florida Keys and on a path for Texas.

BF&M bought $31 million in reinsurance last year, leaving the company with $79 million in net premiums sold. Argus sold $77.9 million in net premiums in 2004.

Mr. Anderson said it was too early to say what type of increase could be added to 2006 policies but that Argus negotiates "very hard" to get the lowest price possible from reinsurers.

"We do get favourable rates relatively speaking ? nevertheless, we do expect rates to go up."

He said Argus will be in a better position to know what increases consumers can expect once negotiations with reinsurers get underway in the next few weeks.

Mr. Anderson, a veteran of the London insurance market, joined Argus in early 2004.

He was previously head of the European property and casualty business for Commercial Union.

Commercial Union and General Accident, branded as CGNU, were renamed Aviva Plc in 2002. Aviva is the largest UK insurer and the world's sixth-largest insurance group.