Dear Friend,

Before I say anything, if you have any ongoing financial interest in the New Orleans region, I think you should read this article from the Washington Post:

http://tinyurl.com/pa629

So, just two months before the Atlantic Hurricane season is due to start (and hey, with sea temperatures where they are, there’s no reason why it shouldn’t start a little earlier) it appears New Orleans is at best going to be in a the same position than it was a year ago in terms of sea defences.

Whole swathes of the city are currently not protected to the most basic insurable standards.

What is surprising is not the apparent backsliding from senior politicians, but the sheer scale of the problem.

If New Orleans is seeing the cost of levée rebuilding and improvement tripling to $10bn in less than a year due to our increased understanding of the risks it faces, what other unknown costs are waiting to be loaded into our catastrophe models above and beyond the 40% that RMS has already announced?

This will run and run — and judging by the weather forecast, we know for almost certain it won’t be long before the next chapter in the saga is written.

In April’s issue of the magazine I borrowed a phrase coined by a Benfield report used to describe this “hard on top, soft underneath” market. That phrase was crème brûlée — the pudding that sees a soft and squidgy custard topped off with hard, but brittle caramel.

Well, this year I can only see this crème brûlée dessert getting more and more inedible.

The hard bits are going to be positively toasted — but they’re more brittle than ever, especially with the whole of the class of 2005 and assorted surviving Cat writers perched precariously on the A- ratings precipice. Meanwhile the soft bits everywhere else are going to start losing their shape and turning positively runny.

How this burnt and sloppy pudding is going to maintain its appeal to investors over 2006 is beyond me — but then there’s no accounting for taste!