The call for a public/private partnership to create adequate reserves for a costly storm was made at an informal meeting of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.

In the wake of Katrina, members of the committee sought the briefing to determine how the industry is dealing with the aftermath of the storm's multibillion-dollar rampage through the Gulf Coast states.

Representatives of both the agent and carrier communities expressed confidence that insurers had the financial and administrative resources to cover insured losses from the storm, which modeling firms have estimated could range anywhere from $20-to-$60 billion.

However, the representatives did contend that the enormity of the damage showed the need to ensure that claims resulting from future events could also be paid. Potential areas for cooperation discussed ranged from those as simple as allowing one adjuster to determine which damages are covered by flood or homeowners insurance, to a possible federal program similar to the Terrorism Risk Insurance Act.

Michael J. McCabe, a senior vice president and chief legal officer for Allstate, said the company is an "ardent advocate of a new private and public partnership against catastrophes both natural and manmade." He said such a partnership could be established with input from the insurance industry, the federal government and from state mechanisms such as those existing in hurricane-prone states like Florida.

David Daniel, a partner in the insurance agency of Daniel & Eustis, offering comment on behalf of the Independent Insurance Agents & Brokers of America, said the IIABA "absolutely supports" the concept of a joint public and private arrangement.

He said the group backs a bill (HR 846)–the Homeowners' Insurance Availability Act, introduced by Rep. Ginny Brown-Waite, R-Fla.–designed to ensure sufficient capacity exists to provide natural disaster coverage for homeowners by auctioning reinsurance contracts for specific regions.

One potential problem cited is the possibility of conflicts as adjusters seek to determine whether homes were damaged by covered wind or uncovered flooding.

Markham McKnight, president of BankCorp South Insurance Services Inc., appearing on behalf of the Council of Insurance Agents & Brokers, noted that between federal flood and private homeowners insurance, policyholders could be caught in the middle of a coverage battle.

"There is no dispute resolution mechanism in place," Mr. McKnight said. Instead, he argued that the two policies should "dovetail" to avoid instances where a policyholder has to wait for the dispute to be resolved. Policyholders, he said, "want to be reimbursed, and they need relief."

"It doesn't matter to a resident whether it was the wind that got him or the flooding," observed Subcommittee Chairman Richard Baker, R-La., "until he finds out about the difference in coverage."

The National Association of Professional Insurance Agents board, at its annual meeting on Sept. 11, voted unanimously to call on Congress to adopt and fund a coordinated natural disaster catastrophe program, saying the destruction caused by Hurricane Katrina showed that lawmakers cannot wait any longer.

Such a program, PIA said, should include prorated participation by states and local governments, together with all sectors of the financial services industry in the creation of a backstop for insurers suddenly overwhelmed by a rush of claims in the wake of a natural catastrophe.

"The goal of such a program is to provide immediate financial stability to markets in the immediate aftermath of natural disasters, to allow continued market stability, and to provide sufficient time to build back market capacity," said PIA's national senior vice president, Patricia A. Borowski.

Additionally, she said the program should include funding of loss mitigation projects, as well as a provision for the creation of tax-advantaged local or regional enterprise zones in areas affected by natural disasters where recovery is expected to take longer and affect a greater area.

Officials noted the lack of a dispute resolution mechanism to settle flood versus wind claims