Following the increase in UK terrorist activities and the catastrophe that has hit New Orleans, it seems we are all going to have to foot the bill. The total cost of the catastrophe is currently predicted to top $25 billion (£13.6bn), however many analysts predict that the full costs could rise much higher even doubling to $50bn (£27.2bn), although with attempts to reduce the flood waters expected to take several months, it will be some time before a clear picture emerges.

Here in the UK, the effects of the disaster in the US are already starting to be felt through higher costs at the petrol pumps, as European reserves of oil which have been set aside for disaster protection are redirected to America to help their recovery efforts. Oil prices have already been rising in recent months hitting record levels as traders have pushed the price up on fears of supply problems from the Middle East as terrorism worries have grown. Last week the wholesale price of petrol charged by suppliers rose again due to hurricane Katrina and retailers say that more increases are on the way, making the £1 a litre that is being experienced in some areas inevitable across the country. Royal Dutch Shell and BP have already announced that they are set to raise prices still further in the wake of hurricane Katrina. While US motorists have to cope with fuel prices now at a record $3 a gallon, the research group Catalist has found that the average price of a litre of unleaded petrol in the UK was now 92.3p.

Ray Hollaway of the Petrol Retailers Association said, "In the coming week we are going to see increases of 3p or 4p a litre. That's unavoidable because of what happened in the US...We have to accept that the days of 80p a litre are behind us.”

In addition to the actual cost of supplying fuel in the UK, the costs to consumers is further being exacerbated by the governments refusal to reduce taxation levels, and as the oil companies are to spend millions of pounds ahead of all previous expectations, upgrading UK pumps and station forecourts, to technically enable them to charge higher prices as prices spiral beyond the £1 a litre mark.

Analysts are worried that the increases in fuel prices will lead to inflation rises and decreased public spending, as suppliers transport costs increase, and experience has shown that petrol price hikes do not lead to a significant reduction in public fuel demands, but rather it leads to consumers cutting back their spending in other areas causing a slowdown in the economy.

The insurance costs of recent events have caused huge additional expenses to the insurance companies. The impact of Katrina on companies operating onshore and offshore in the Gulf of Mexico has meant that insurers such as Lloyds may be hit fairly hard, with the bill for the Lloyd's market being tentatively placed at around £1bn to £2bn. Lloyds stated that the, “terror attacks in London have had a big human cost, but our analysis suggests that the economic costs may be quite low.” Despite Lloyds' claims that the effect of the London bombings has cost them relatively little financially, in light of expected future attacks and calls for terrorist activity exclusions to be scrapped, it seems likely that premium increases will be gradually introduced.

Since Katrina, and the Asian tsunami which struck at Christmas, many insurers are becoming worried about the rising costs of the increasing number of serious weather related incidences. As a consequence of the insurance payouts for the devastation and carnage wrought in Asia and by hurricane Katrina, many analysts believe it is inevitable that businesses will also face huge rises in premiums down the line. The Association of British Insurers (ABI) issued a recent report stating that, “in the UK, climate change could increase the annual costs of flooding by almost 15-fold by the 2080s under the high emissions scenario, leading to potential total losses from river, coastal and urban flooding of more than $40bn (£22bn).”

The ABI ( http://www.abi.org.uk/ ) also released research findings indicating that less than 50% of small UK firms have a plan in place to ensure that their business could survive should they be hit by an emergency or disaster, and only 50% of UK households possess any life insurance with 25% of mortgage holders actually have insufficient life insurance to cover their debt therefore placing their home at risk.

With UK personal debt over £1 trillion, decreasing levels of investment through products such as individual savings accounts (ISAs), it is perhaps understandable that many see insurance protection policies as being one of the first expenses that can be put off until money is more plentiful, however it is at these times when finances are tight that these financial products are most important.

The growth of financial services such as UK based Moneynet ( http://www.moneynet.co.uk ), eSure.com, and Confused.com combined with the proliferation of financial information provided by the likes of Which?, the Financial Times and the BBC, has helped to increase competition between insurance providers and assisted in keeping prices down. However the current outlook seems to be that prices are going to rise, but by how much is unknown until the full effect of recent events is calculated. The only thing that is certain is that it no longer matters where the disaster happens, in the end the UK consumer will eventually have to pay.