Isabel puts the wind up insurers

THE world's insurers were on Thursday night crossing their fingers in the hope the potentially devastating US hurricane Isabel would peter out and save them from a raft of multi-million-pound damages claims.

Royal & SunAlliance and several syndicates at Lloyd's of London all have exposure to property and casualty policies written in the US.

But as the hurricane threatened to hit the mainland as a 45mph tropical storm, down from the forecast 105mph, insurance executives scaled back their estimates.

Some experts have warned that, globally, insurers face losses higher than the £16.7bn caused by hurricane Andrew in 1992. Peter Hiscox, chairman of Lloyd's syndicate Hiscox, said: 'We will definitely pay a few million dollars in damages because of this.'

He added: 'Claims against Lloyd's would have to top £2.5bn to hurt the market. This will hurt local insurers and reinsurers. It will also convince people that prices don't need to go down.'

Lloyd's is shortly expected to provide a losses update.

Insurers such as RSA are confident that selling on their risks to reinsurance companies will help to protect them.

RSA, which until it sold off its RSUI reinsurance unit in July, had a massive exposure to US catastrophes. It is understood to have capped its Isabel liability at £25.4m.

Claims above that amount will be met by reinsurers. The shares were down 3/4p at 120 1/4p.