Of course, many Big “I” members were among the storm's victims. At the convention, the association's leaders called on carriers to lend them as much assistance as possible, as they work to re-establish their agencies in the weeks and months ahead. Shortly after Katrina hit, IIABA established a relief fund for affected members. After the convention, the association released an “open letter” to the industry, asking insurers to help storm-ravaged agencies by being flexible in regard to such matters as collecting on agency-billed business and paying agents renewal commissions while their businesses are interrupted. The Big “I” also asked carriers to consider offering affected agents low-interest financing and assistance in obtaining office furniture and equipment, among other forms of aid.

In responding to Katrina and the additional $4 billion to $7 billion hit from Hurricane Rita, the insurance industry likely will find that merely living up to its contracts won't be enough. During a panel discussion at the Big “I' convention, Robert Joyce, chairman and CEO of Westfield Group, observed that insurers will be under a “tremendous amount of pressure” to be as generous as possible. “I think the adjudication of claims is going to be very interesting, and certainly coverage will be tested,” he said.

He sure had that right. A few days after the convention ended, Jim Hood, the attorney general of Mississippi, filed suit against five major insurers in an effort to force them to pay storm victims for flood damage to their properties–even though homeowners policies explicitly exclude coverage for it.

Meanwhile, adjusters in the field try their best to look at destroyed houses and tell how much of the damage was caused by hurricane winds, which are covered, and how much by flooding and storm surge, which are not. The result is a public relations nightmare for insurers as they attempt to give insureds what they are entitled to–which unfortunately is less than what they need: a new home. Post Katrina, the wisest thing I heard was a comment on the radio by Robert Hartwig, chief economist for the Insurance Information Institute, who said the purchase of federal flood insurance should be mandatory for everyone living in a high- or low-hazard flood zone. Insurers and FEMA might have to dicker over each other's share of the losses, but at least insureds would have the funds to rebuild or relocate.

Although the insurance industry appears to have adequate resources to handle these latest hurricanes, the magnitude of the losses is prompting many in the industry to call for the federal government to play some part in insuring natural disasters. During the panel discussion at the Big “I” convention, William J. Mullaney, president of MetLife Auto & Home, said his company has been trying to handle the volatility of risk in coastal areas by shifting more of its exposures inland. “But I also think there needs to be…a further discussion that we need to have as a country, around how do we handle certain places…like Florida, like Long Island, where home values have gone up so high and the concentration of homes is so great?”

One place where such a discussion is expected is at a meeting of state insurance commissioners next month in San Francisco. Proposals to help the industry deal with acts of terrorism as well as natural disasters will be debated. Whether Congress will react favorably to any calls for the government to help shoulder the burden of natural diasters remains to be seen.

Some scientists say the four hurricanes that hit Florida last year and the enormous power of Katrina and Rita this year (both reached Category Five in intensity) presage increasingly violent hurricane seasons to come. The public will expect the federal government to come up with a better response to such disasters than what they've witnessed this year. They likely will want better solutions from the insurance industry too.