Gerard Finley, chief casualty underwriting officer for Princeton, N.J.-based American Re, said the record 2005 losses have put the issue of risk accumulation on the radar screen of underwriters as never before.

"Loss costs, particularly for casualty lines, are so darn difficult to predict," he said. "That has resulted in the muscles the actuaries have grown."

Last year's passage of class action lawsuit reform by Congress appears to have sated its appetite for such measures, Mr. Finley said. "But a lot of states are active now and that could play an important role, particularly in some key states," he said.

Benfield Inc. Philadelphia branch manager James Buysse said that as the ratings agencies increase capital requirements for both reinsurers and insurers, prices are bound to increase.

Primary companies will also be forced to lessen their overall exposure if they are forced to retain risk at the lower level while increasing reinsurance cover at the higher levels, he added.

Brad Kading, executive vice president of the Association of Bermuda Insurers and Reinsurers, said that having borne nearly one third of the 2005 catastrophe losses, the Bermuda companies are playing an ever increasing role in providing property catastrophe capacity.

In addition, the Bermuda Monetary Authority has recently moved to strengthen solvency regulation of the top class of Bermuda insurers and reinsurers, he said.

Philadelphia--The outcome of the Mississippi lawsuit over insurers' rejection of homeowners' wind storm claims involving tide surge will hinge for the most part on the test used to determine what caused the damage, a legal expert said.

Speaking at the Chartered Property Casualty Underwriters Society reinsurance forum Friday, New York attorney Perry Kreidman said other coverage issues stemming from Hurricane Katrina could center on business interruption claims caused by mandatory evacuations and insurers' reinsurance disputes.

Mr. Kreidman said the suit filed last September by Mississippi Attorney General Jim Hood will be a critical test in determining what coverage the insurance industry is responsible for with catastrophes involving wind and floods.

The Mississippi case that a federal judge sent back to state court last week seeks to compel coverage for damage from wind-driven tide surge during Gulf Coast hurricanes. Insurers contend such losses are not covered under policy flood exclusion language.

"It is clear that reasonable arguments can be made for any of the causation tests to find that the losses were caused in whole or in part by wind or flood/tidal surge/water or combination thereof," Mr. Kreidman said.

From a practical point of view, the impartiality of the local judge or jury, and their ability "to divorce the horrible, life-shattering consequences of Katrina from the cold and dispassionate words of the policies covering or excluding the losses," could be a deciding factor.

As for business interruption claims, Mr. Kreidman said the major industries involved include gaming, petrochemical and health care.

In addition, contingent claims could come into play because of disruption to the Port of New Orleans, he said.

Primary companies could trigger reinsurance disputes because they chose for reasons of expediency or regulatory politics to waive defenses and settle claims, according to Mr. Kreidman.

Normally, the reinsurer would be bound by the "follow the fortunes" of the insurer doctrine requiring it agree to such settlements if they were made in good faith.

But Mr. Kreidman noted that the doctrine does have its limits. And the sheer size of the Katrina loss magnifies the issue to the industry.

"Whatever the outcome of these weighty disputes, the most practical approach would be for the cedents and their insurers to keep one another informed about the status of cases and claims and to reach a mutual consensus on how to proceed," he said.