THE FIRST thoughts, of course, must be with the people of the American Deep South whose lives have been lost or ruined because of Hurricane Katrina. Albeit that the commercial ramifications pale beside the human costs, the Caribbean winds are creating financial waves, nevertheless.

The oil and insurance sectors find themselves with most to worry about. The effects on the price of oil may be felt by most people, but the impact on insurance may be more far reaching.

Almost everyone in the world will feel the impact of a higher oil price. After all, if the price stays adjacent to $70 a barrel, it will increase the price of heating, lighting and transportation, whether you live in Biloxi or Bangkok. Yet the oil industry problems may be temporary. Yes, the winds have halted oil production on Gulf of Mexico platforms, but it is the equipment, not the reserves, that is damaged and in time the oil will be recovered.

Ditto for refining. Equipment may be bent and broken by Katrina, but kit can be replaced. Moreover, a lid may be kept on the price of petrol and oil, even in the short term, because the reduction in refining capacity will weaken demand for hydrocarbon raw material. At the same time, oil production and refining capacity in other parts of the world can be turned on. Many believe that the price of oil has risen in the past couple of years because of speculative trading activity as much as because of fundamental shifts in the supply and demand equation. The latest price spike may be as much about speculation as fundamentals.

Complacency travels with the doomed on the road to rack and ruin. The fact that the prognosis is relatively benign at present does not mean that it will stay that way. But there is no room for complacency among insurers. The insurance cost of the September 11 attacks and Hurricane Andrew, which struck in 1992, may prove to be larger, but there is no disguising that Katrina will be a very large event in insurance terms.

On its own, Katrina is unlikely to bring insurers down. According to current estimates, it will cost as much as the four hurricanes that whipped the American tropics last summer. It is also the case that insurers have adopted a more disciplined approach to pricing in recent years. Stung by past claims, the industry has taken steps to see that it collects enough in premiums to cover the obligation to meet claims.

Yet the 2005 hurricane season is not finished. The insurance industry may be able to withstand the cost of Katrina, but if nature spawns three siblings that all mow over populated areas, the story will change. At present, it is insurance company profits rather than insurance company capital that is under threat. But capital will be in danger if the winds blow again.

In any event, it is likely that reinsurers — the industry subgroup that bears the brunt of meeting insurance claims — will become more cautious. This is good for their investors and for the stability of the insurance system, but it may mean that the insurance companies that distribute product to clients will be obliged to take on more of underwriting risk. The US government may find itself obliged to finance more post-hurricane rebuilding costs. Governments in all countries, including our own, may find themselves asked to stump up for natural disaster claims.

Individual consumers may also find it more expensive to buy insurance. If Katrina causes lasting damage to the oil industry, therefore, it may be because it will cost producers and refiners more to insure Caribbean kit.

Insurers may yet find themselves hurt — but if they escape the suffering, it will mean that the pain is more widespread.

BBC walks a fine line, again

MARK THOMPSON wants the BBC to become more like Google. Or so it sounded at last weekend’s Edinburgh Television Festival. While ITV and Channel 4 believe that their future lies in launching more channels, the BBC is past all that. It wants to become, if not a retailer, a sort of online cultural shopping mall, capitalising on the success of bbc.co.uk.

If you hear a catchy tune on your favourite morning radio station, the BBC wants to help you to buy it later that day, probably by providing internet surfers a choice of potential online retailers. A similar service could apply to DVDs or merchandise, or anything else BBC-related. The plans are in their infancy, but what is clear, according to Mr Thompson at least, is that the previously hard “public service/commercial boundary” is outmoded in the digital era.

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