S&P warns insurance syndicates face ruin from hurricane

Standard & Poor’s has said that some of the syndicates in Lloyd’s insurance market could be forced to go out of business due to losses from Hurricane Katrina.

The ratings agency was quick to point out that it was much too early to say which of the 62 syndicates might be affected, but that there were 20 which would require close scrutiny.

Four of these syndicates already have S&P’s lowest rating of 1 on a scale of 1 to 5, which denotes that they are at highest risk of going out of business.

S&P also said that no damage was expected to Lloyd’s overall market, although it could suffer a downgraded rating.

Meanwhile another ratings agency, Fitch, announced that it was putting Allstate, State Farm Mutual, and Montpelier Re on watch for possible downgrade due to exposure to claims relating to Hurricane Katrina.

Allstate’s shares have dropped 7 percent, while Montpelier Re has already fallen by over 23 percent since the hurricane hit.

One problem facing the insurers is that they may not be able to raise rates for premiums to help cover their payouts.

Louisiana and Mississippi, two of the states hardest hit by Katrina, are expected to pass legislation barring insurers from raising rates sharply in the short term.

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