Under the bill, the Treasury Department would establish regional auctions in which both private insurers and reinsurers could purchase reinsurance from the government at actuarial rates. This would counter a current trend that sees many carries unable to obtain affordable reinsurance, according to officials at the National Association of Mutual Insurers (NAMIC).

The bill is H.R. 846, the Homeowners' Insurance Availability Act of 2005.

"This bill would benefit both large and small carriers, as large carriers might choose to buy the contracts directly from the program, while smaller companies might choose to buy this coverage from reinsurers who would be permitted to divide and transfer their contracts to many carriers," according to Justin Roth, senior director of federal affairs at NAMIC in Washington, D.C.

The legislation was introduced by Rep. Ginny Brown Waite, R-Fla.

The system works by having the government sell the contracts it has purchased and use the funds generated in the sale in the event of a future natural disaster. "This is an approach that will have very limited federal involvement and will encourage more private involvement," Mr. Roth said.

Under the proposed legislation, the federal government would only step in if a disaster was equal to or greater than a one-in-100-year event. There has never been an event that would have met the high threshold of this proposed program, according to NAMIC.

Any event that does not meet that threshold would still be covered by the private market, Mr. Roth explained. For any disaster over this threshold the companies would pick up 50 cents on every dollar. Like the previous version of this bill, the Congressional Budget Office (CBO) is expected to score it revenue neutral, which means that it will not cost the government money and will possibly be a revenue raiser for the federal government.

"NAMIC believes this program will lead to more companies entering the disaster markets and will eventually create market stability," Mr. Roth said.

Mr. Roth said that introduction of the bill "ensures that debate on the problem of insurance availability in disaster prone areas will continue.

"NAMIC believes that this concept will allow insurers to be able to purchase affordable reinsurance, therefore allowing more insurers to enter marketplaces that are prone to natural disasters," he said.