Hurricane Gustav won't hit reinsurers hard: Fitch

Residents talk in front of the American Legion post, which had its roof damaged by Hurricane Gustav, in Houma, Louisiana, September 1, 2008.

LONDON (Reuters) - Hurricane Gustav, which lashed the coast of Louisiana and the Gulf of Mexico but by Tuesday had weakened to a tropical depression, is unlikely to hit reinsurers too hard, credit rating agency Fitch said on Tuesday.

Initial estimates put the insurance bill from the storm at $4.5 billion to $10 billion, much less than 2005's Hurricane Katrina, which cost the industry over $41 billion.

"Gustav is more of an earnings event for reinsurers," Chris Waterman, a senior director in Fitch's Insurance Group in London told journalists, rather than a catastrophe that knocks a hole in the industry's capital.

"Most reinsurers would plan for this kind of event. It's probably in line with their estimates," said Waterman.

Gustav might slow the rate of price declines in property-catastrophe reinsurance in the United States, but it was unlikely to be big enough to halt the falls completely or push prices back up, Waterman said.

The finance director of London-based insurer Amlin (AML.L) said in June that reinsurers could absorb another Hurricane Katrina, the world's costliest disaster, without much impact on risk pricing, as the industry had rebuilt its capital base and tightened up its risk management.

Fitch's Waterman agreed, saying reinsurers' bill from a rerun of Katrina would be only around half of what it cost them previously, because they had trimmed their exposure to a major storm.

But he struck a note of caution, warning reinsurers could take hits from a string of storms that may threaten the U.S.

Hurricane Hanna is bearing down on the Bahamas, while Tropical Storm Ike formed in the Atlantic Ocean, and another has formed off the Cape Verde Islands.

(Reporting by Simon Challis, editing by Will Waterman)