Chicago - Most of the insurance industry's discussion post-Hurricane Katrina has focused on the significant rating agency model changes and the compounding effect of catastrophe model changes. But a new study by Aon Re Global tells the investor side of the story."Investors clearly understand the differences between insurers and reinsurers and have set differing tolerances for each," says Stephen Mildenhall, Aon Re Services executive vice president and author of the study. "Our study confirms that investors expect higher earnings and capital volatility from reinsurers than they expect from insurers."

Key points in the study show that insurers were allowed capital volatility of 3% to 6% and were allowed to lose slightly more than a quarter of pre-Katrina consensus earnings before significant shareholder value deterioration occurred. Reinsurers on the other hand were allowed capital volatility of 12% to 19% and were allowed to lose an entire year of pre-Katrina consensus earnings before significant shareholder value deterioration occurred.

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