Damage caused by hurricanes Katrina and Rita could cost the insurance industry up to US$40 billion, Munich Re said today.

Following an inspection of the affected region by its experts, Munich Re, the world’s largest reinsure, said it was estimating the overall insured losses from Katrina at up to US$30 billion. It gave a tentative estimate for losses from the less destructive Rita of between US$5 billion and US$10 billion.

Munich Re said its own liability for Katrina could amount to US$600 million after tax. It put its possible net loss from Rita at US$180 million.

In a news release, the company cautioned that “there are still significant uncertainties regarding coverage issues and thus also about the actual loss burdens facing the insurance industry, with substantial differences between the highest and lowest loss estimates.”

Munich Re noted that other estimates of losses from Katrina have been as high as US$60 billion. If that turned out to be true, the company said, its own net loss could be nearly US$780 million.

The reinsurer raised the prospect of higher premiums.

“The upcoming round of renewals in reinsurance business must take account of the rising loss trends and greater risk potentials,” Munich Re said. “Substantially higher prices are necessary to continue covering natural hazard risks in the future.”

Reinsurance companies sell coverage to other insurers, spreading risk so the system can handle huge losses from major disasters.