Two years since Hurricane Katrina hit the USA, and New Orleans in particular, leaving behind more than USD 40bn in claims, the storm is continuing to have repercussions in a number of ways, as the new Axco non-life report on the market explains.

The fallout from the hurricane and the devastation it caused are reported to be affecting the public view of the US insurance industry and have even become part of the US political landscape in the run-up to the next presidential election.

Given the vast number of individual claims – around 1.7mn for homes, businesses and vehicles – it is probably no surprise that a substantial number of insureds have been unhappy with the way their losses have been settled. Add gaps in coverage, and the result is widespread dissatisfaction with the US insurance industry amid a plethora of negative press reports and hundreds of law suits.

For example, in the case of Leonard vs Nationwide, the insurance company paid a couple only USD 1,228 of more than USD 130,000 worth of damage to their house. A federal judge decided that their policy did not cover water damage resulting from storm surge. Although in September 2007, a federal appeals court upheld the judgement, lay people do not always understand the reasoning. What they see is the impact on the individuals who have lost their homes. That the US insurance industry has been making record profits at the same time does not help the public’s general impression of insurers.

A US Senator from Mississippi, Trent Lott, is one of thousands of homeowners fighting their insurers - his for the loss of his USD 400,000 home was rejected by his insurer. He put a provision into legislation, signed by President Bush, directing the Department of Homeland Security to investigate potential fraud by the insurance industry. Senator Lott is also backing legislation that would repeal the insurance industry’s partial exemptions from anti-trust provisions under the McCarran-Ferguson Act.

Part of the problem is defining precisely what damage is covered by commercial insurers, whose policies cover wind and not flood, and what is covered by the National Flood Insurance Program (NFPI). In late September 2007, the House of Representatives approved the Flood Insurance Reform and Modernization Act of 2007 that would extend the NFIP and allow people living in flood plains to purchase wind coverage from the government programme. This bill is now before the Senate.

With an eye on the 2008 presidential election, aspiring candidates are also taking a strong interest in the whole issue, as millions of voters in coastal states are being forced to shop around for cover and usually pay much higher prices, even if their property is hundreds of miles from the most vulnerable areas.