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Losses from Hurricane Gustav shouldn’t lead to a hike in insurance rates this year, according to the industry.

Insured losses from Gustav are currently estimated at between $2 and $10 billion,  that’s substantial, but a far cry from Katrina’s $40 billion worth of destruction in 2005.  Katrina prompted higher premiums and a reduction in coverage for many coastal communities.  But since then, increased competition and some unusually quiet hurricane seasons have meant a steady drop in rates.  Doug McLeod of Business Insurance Magazine says he doesn’t anticipate that will change much this year.

“The insurance industry is so strongly capitalized now, and the reinsurance industry protecting it is so strongly capitalized and is so able to raise capital quickly that even an event like Katrina, which would hit both insurers and reinsurers, would be absorbed pretty quickly.”

Gustav may have been the first major test of the insurance industry’s efforts to reduce its exposure to hurricane losses, but it may not be the last this year,  Hurricane season remains far from over with three named storms currently being tracked – a hurricane watch may be required for the southeastern US as Hanna works its way through the Bahamas.