Insurers are reducing the amount of coverage they provide to companies at risk from natural disasters after last year's record hurricane season caused $57.3 billion in insured damage.

The amount of natural-catastrophe insurance available to U.S. companies has declined 15 percent to 20 percent from a year ago, said Aaron Davis, director of the national property practice at Aon Corp., of Chicago, the world's No. 1 insurance broker. The decline is more severe for companies with property in hurricane-prone areas, he said.

American International Group Inc., one of the world's biggest insurance firms, and Zurich Financial Services had some of the greatest losses from last year's storms and decreased their potential payouts as much as 25 percent this year.

"Many big companies are getting half the limit they purchased before, or less, and also experiencing triple-digit premium increases," said Robert Howe, head of the global property practice at Marsh & McLennan Cos. Inc., of New York. "It's cutting across all of American business with catastrophe exposure."

Hurricanes Katrina, Rita and Wilma pummeled the southeastern United States last year and caused insurance rating agencies to toughen their standards, forcing some insurers to limit their policy sales. Predictions of more frequent and expensive storms also helped drive up prices and shrink the amount of coverage available, said Davis, the Aon executive.

Zurich North America, a unit of Switzerland's Zurich Financial, has cut its overall maximum probable loss from U.S. windstorms about 18 percent since the beginning of the year, in part by reducing coverage, said Dan Loris, Zurich's senior vice president of property in Schaumburg, Ill.

AIG, of New York, said in March that it had been shrinking coverage limits, or its maximum payout on policies, 20 percent to 25 percent in catastrophe-exposed areas.

Before Katrina, Omni Hotels Corp. had more than $100 million of storm insurance from AIG, Zurich Financial and other insurers to protect its 39 hotels in North America. Its coverage has since dropped 95 percent, said Mary Lynn Bangs, director of risk management at the Irving, Texas, company.

"If there's a substantial hurricane, I can't imagine our limit not being exhausted," she said. Omni's two New Orleans hotels had $23.5 million in Katrina claims.

If the retailer had been required to pay for its 2004 and 2005 hurricane claims itself, earnings per share would have been reduced by 2 cents in 2004 and 4 cents in 2005, the Bentonville, Ark., company said.

Insurers learned from Katrina that their forecasts underestimated the effect of "secondary-loss factors," such as blackouts, looting, and other civil disturbances that can occur after a disaster, said Loris, the Zurich executive.

To account for the changed expectations, prices for earthquake coverage have also climbed, Loris said, even though there has not been a major U.S. quake since 1994, when Southern California was left with $12.5 billion of insured losses.

Smart & Final Inc., a chain of 250 warehouse grocery stores in the Western states and Mexico, renewed its property policy on July 1 and is paying twice as much for half the coverage, said Jan Berger, vice president and treasurer of the Commerce, Calif., company.

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