In fact, when all the damages are tallied, Rita may end up as the fourth most expensive insured loss in U.S. history.

Following within weeks of Katrina, Rita struck the Gulf Coast between Texas and Louisiana on Sept. 24, missing Houston and Galveston, along with much of the region's oil refineries, which supply about a quarter of the nation's energy needs.

Insured damage estimates from three modeling firms--AIR Worldwide Corp., Eqecat and Risk Management Solutions--range from $2.5 billion to a high of $7 billion. The high end of losses expected from Katrina is $60 billion.

However, if the high end holds, Rita would be among the top-10 most costly hurricanes to hit the United States, according to Jay Gelb, an analyst for Lehman Brothers in New York.

Fitch Ratings noted that Rita was similar in magnitude to 2004 Hurricanes Ivan and Frances, which are ranked third and fifth, respectively, on the Insurance Information Institute's top-10 list. Should losses come in at $7 billion, it would make Rita the fourth most expensive hurricane in U.S. history behind Ivan, but ahead of 1989's Hugo, which cost the industry less than $6.4 billion in 2004 dollars.

Taking into account loss estimates from Hurricanes Dennis, Katrina and Ophelia, Fitch said this season could cost insurers up to $70 billion--equaling 17.5 percent of the industry's statutory surplus, or about two full years of statutory earnings.

Standard & Poor's was optimistic about the industry's ability to absorb these latest losses, but is keeping a wary eye on developments. Thomas Upton, a senior credit analyst with S&P, said 13 insurers were placed on Credit Watch out of 80 domestic and global companies it contacted.

The 13 carriers cited were ACE, Allmerica Financial Corp., Allstate, IPCRe Ltd., Lloyd's, Montpelier Re, Oil Casualty Insurance, PXRE Corp., State Farm Mutual Automobile Insurance, Swiss Reinsurance, Transatlantic Reinsurance, United Fire Group, and XL Capital.

The feeling was these 13 needed to go to the investment market for recapitalization of their losses. However, he felt the watch would be "short term" and would be resolved within 90 days. As a sign of how quickly the issue is expected to be resolved, he noted that Montpelier Re would be removed from Credit Watch because it secured $600 million in new equity.

"The impact on the insurance industry from Katrina and Rita is unprecedented," said Mr. Upton, noting that the losses are expected to be three times that of Hurricane Andrew and twice that of 9/11.

The fact that insurers are relying on modelers for their loss estimates is a significant problem for the industry, he went on to say. With flooding keeping adjusters from getting into some areas damaged by Katrina and Rita, insurers do have not solid numbers to work with.

While few rating downgrades are expected, there are a few caveats being expressed by the rating agencies.

A hard market must follow, whether it is regional in nature or extends generally, because lost capital must be replaced, warned Mr. Upton. Some lines might have to endure long-tail effects from the storms, he suggested--citing environmental, where claims could drag out for years.

Mr. Upton expressed concern that political pressures could also affect the industry. He said there will be those who feel insurers should go beyond the limits of their contracts to help policyholders, noting the suit in Mississippi by Attorney General Jim Hood to force homeowner carriers to pay for uncovered flood damage. Insurers may feel the need to set up separate carriers within a state to shield the greater company from losses endemic to the region, but regulators may oppose the move politically.

"This would be a situation where companies are looking to raise prices to cover a loss, while regulators look to keep prices lower," he added.

Robert P. Hartwig, senior vice president and chief economist for the Insurance Information Institute in New York, said even with the added losses from Rita, the effect on the market will be isolated, with higher costs in homeowners and commercial property insurance, and some auto. Increases would also be focused on reinsurance catastrophe coverage, but again, the spillover would be limited. "The effect will be on a regional basis, and not a general hard market," he predicted.

State Farm has the most significant homeowners exposure in Texas and Louisiana, followed by Allstate in both states. Farmers Group is third in Texas, while Louisiana Farm Bureau is third in Louisiana.

On the commercial property side, St. Paul Travelers is the top writer in Texas and Louisiana. Zurich is second in Texas, followed by Chubb's Combined Federal Insurance Companies. In Louisiana, State Farm is number two and Zurich is third.

Oil and chemical production liability is also a big concern. While property damage comes immediately to mind, there is a ripple effect to consider. "The big issue facing the chemical industry now is restarting operations," said Jim Walters, managing director for Aon's chemical industry practice. This delay, he noted, could trigger business interruption policies beyond the energy sector.

Plants were shut down and evacuated, sparing facilities and lives, but getting the fuel supplies in to operate the plants will be a challenge with rail lines and highways damaged or blocked by flooding, he noted.

The ripple effect, he pointed out, would be other manufacturers dependent upon the chemical plant's production ceasing operations. "If they can't produce and sell, they will sustain their own business interruption loss," he pointed out.

Other insured exposures triggered by Rita could involve marine cargo, trucking and ocean marine, and possibly environmental, Mr. Walters pointed out. But the main exposure would be property and business interruption, he said.

Pricing could move upward after finally seeing some stabilization. "In our world, we are the first to get hit with the hard market and the last to see the soft," he remarked.

Bruce Jefferis, managing director of Aon Natural Resources, said Rita shut down all production in the Gulf. There were reports that some oil platforms were severely damaged, and some were missing.

"Rita was every bit as damaging a storm as Katrina from an offshore standpoint, if not worse," said Mr. Jefferis. While missing a good portion of the oil refining industry in Houston and Galveston, where Rita did come ashore--such as in Beaumont, Texas--refinery damage appeared to be minimal, "which is excellent news," he said.

RMS put offshore platform damage and loss of production from Rita at between $1 billion and $2 billion.

However, until all the offshore drilling stations are inspected, both from above and below the water, any figures on insured losses from Rita "would be a wild guess," he confessed. Another complicating factor, he noted, is that the resources to survey and repair these damaged facilities were stretched thin by Katrina, meaning it could be months before repairs are made.

Hurricane Rita knocked down power lines, sparking fires in Texas and Louisiana, adding to total insured losses of as much as $7 billion.

"The effect [on pricing] will be on a regional basis, and not a general hard market."

Robert P. Hartwig, Chief Economist

Insurance Information Institute