Reinsurers could absorb another Katrina -Amlin

LONDON, June 24 (Reuters) - A rerun of Hurricane Katrina, the world's costliest natural disaster, could be absorbed by the reinsurance market without much impact on risk pricing, a senior insurance executive said on Tuesday.

Speaking at an industry conference in London, Richard Hextall, finance director of London-based insurer Amlin (AML.L: Quote, Profile, Research), said the outlook for the reinsurance market over the next two to four years was challenging, as rising competition puts downward pressure on prices and policy terms.

"It's going to take a major, major event to move the reinsurance market," Hextall said, adding not even a repeat of Katrina, which cost insurers over $41 billion, would be big enough to jolt the market. "It's got to be a lot bigger than that."

Reinsurers had rebuilt their capital bases and tightened up their risk management following events such as the destruction of the World Trade Center in 2001 and Katrina in 2005, Hextall said.

Since Katrina, reinsurers have trimmed their exposure to major catastrophes, while setting aside more capital and charging higher prices for these risks than they had before, limiting the likely amount of market dislocation following a large natural disaster.

But some reinsurers which had not taken steps to ensure they have adequate liquidity to cover claims from major catastrophes could be caught out by financial market turbulence, Hextall warned.

Amlin has secured guaranteed lines of credit from banks so it could quickly get hold of cash to meet policyholder claims, Hextall said, so it would not need to be a forced seller of some of its bond or equity investments to free up cash. (Reporting by Simon Challis; Editing by David Holmes)