Standard & Poor’s Ratings Services has placed 10 insurers and reinsurers on CreditWatch with negative implications due to their exposure to Hurricane Katrina.

The ratings on insurers with potential losses that were within expectations have not been placed on CreditWatch at this time, S&P said. The affected firms are: ACE Ltd., Allmerica Financial Corp., Allstate Corp., Lloyd’s, Montpelier Re Holdings Ltd., Oil Casualty Insurance Ltd., PXRE Corp., State Farm, Swiss Re and United Fire Group.

Standard & Poor’s says it has evaluated personal lines, commercial lines, and reinsurance companies as well as bond insurers and mortgage insurers. Industry estimates for total insured losses are currently in an unusually wide and fast-evolving range of about US$25 billion to US$60 billion.

“However, we remain skeptical about the reliability of any of these numbers,” said Standard & Poor’s credit analyst Damien Magarelli. “At this point, we can only say with confidence that projected losses have increased sharply from initial estimates.” In addition, assuming additional capital is not raised, as losses grow, greater quantities of ratings will be lowered, and the ones that are lowered will be lowered by more notches.

Relative to the respective ratings, the companies placed on CreditWatch today have sufficient risk-management and risk-mitigation skills, capital, and liquidity to accommodate the losses they are likely to incur, it says. However, an unusually high degree of uncertainty exists in assessing the magnitude of the claims the companies might be facing, and the standard models used in the industry for predicting catastrophic losses from hurricane scenarios might not have captured all of the related risks now in play, S&P cautions. As most companies relied heavily on those models to price their policies and manage their risk, insurers and reinsurers with the greatest exposure generally are not yet able to fully assess the magnitude of their potential losses.

The rating agency says that it believes that the bulk of the above-mentioned risks will have the greatest impact on commercial lines insurers and reinsurance providers. Personal lines companies will experience substantial losses as well.

Standard & Poor’s also considered its ratings on life insurance and health insurance lines. However, few rated life and health insurers have significant concentrations of risk to the affected markets, primarily because of their overall geographic diversity or focus. Although there will be some business disruption, lowered sales, higher expenses, and perhaps even insured losses, taken in context to the overall earnings and financial strength at most rated firms, no ratings are likely to be affected.

“Today’s CreditWatch placements highlight the continued material uncertainty in accurately quantifying the insurance industry’s ultimate exposure,” said Standard & Poor’s credit analyst Steven Ader. “However, downgrades are not inevitable.”

Standard & Poor’s says it will be meeting shortly with the managements of the companies placed on CreditWatch today and expects to resolve the status of most of today’s listings within 90 days. The status of the ratings on several companies, though, could take longer to resolve. Moreover, the overall situation remains sufficiently uncertain that further exposure to unforeseen risks could develop, necessitating further CreditWatch placements.