These pools, he said, would allow for the states and the federal government to prepare for a major catastrophic event that could overwhelm the insurance industry.

"There is simply not enough capital, not enough money in the system," to handle major catastrophic events such as Hurricanes Katrina and Rita, Mr. Liddy said. "The insurance industry is not built to handle these types of events. We're built, really, as an industry, to deal with events that are much more predictable."

A bill to establish a federal catastrophe pool has been introduced in the House by Rep. Ginny Browne Waite, R-Fla., and Rep. Clay Shaw, R-Fla. Mr. Liddy said Allstate is working to form a coalition to support the bill in Congress this year.

Although work to build that coalition has only begun in recent months, Mr. Liddy said he would like to see representatives from the National Association of Insurance Commissioners as well as building trades, the realtors and "all the people who benefit from the housing market" join the effort.

Additionally, by having state pools as the first line of protection, the system would avoid charges of one area subsidizing the insurance for another. "We are not suggesting that people in Iowa fund the good life for people living in Florida, South Carolina or Georgia," Mr. Liddy explained.

Mr. Liddy added that establishing this two-tiered system would increase the availability of coverage. Allstate itself has stopped writing new policies in Florida, Louisiana and the New York metropolitan area, including Westchester County and Long Island. However, with a state and federal catastrophe backstop in place, Mr. Liddy said, "we'd sell more insurance."

Catastrophe pools already exist for hurricane damages in Florida and earthquakes in California, and Mr. Liddy noted that officials from other major states such as Illinois and New York support the concept.

Critics of the federal catastrophe fund proposal have argued that establishing such a pool would be unnecessary and that major catastrophes can be and are insured, pointing to the post-Katrina influx of capital into the reinsurance market as proof of the industry's capabilities.

However, Mr. Liddy said this was misleading, and that while $10-to-$12 billion in new capital has moved into the reinsurance market, the hurricane season of 2005 is currently estimated to have caused between $60 billion and $80 billion in damages. "Do the math," he said.

Given that the recent extension to the federal Terrorism Risk Insurance Act passed only days before it was set to expire, Mr. Liddy acknowledged there might be an unwillingness on the part of lawmakers to get involved in what could be perceived as a similar program. (The TRIA framework provides government support for insurers when terrorist events hit certain loss levels.)

He said the federal catastrophe pool is actually a "whole different concept" than the TRIA program in that it would be funded prospectively; with states and policyholders paying into the fund rather than having the government recoup losses afterward as would be done under TRIA.

Another goal for some in the insurance industry has been the establishment of an optional federal charter, which Mr. Liddy said is necessary to "free up the insurance industry" and spur more innovation.

As an example of how insurance could be regulated federally, he pointed to the system currently employed by the banking industry. "I think the banking industry is a very interesting parallel," he said. "I think that is a model that's worked very well in the United States."