David A. Smith, director of ProtectingAmerica.org–an organization politically and financially supported by Allstate–was quick to counter-attack, dismissing industry opposition as “shortsighted and misinformed.”

“To in any way contend that a privately funded backstop is somehow a 'subsidy' is flat out wrong,” he said. “We are supporting a privately-funded federal backstop with money coming from the revenues of participating insurance companies.”

Insurers should “do the math,” added Mr. Liddy, contending that new capital coming into the industry is not nearly enough to make up for what's been lost the past two disaster-prone years.

However, the American Insurance Association, for one, was unimpressed as Julie Rochman, a senior vice president, argued that “the private market has worked and can continue to work…”

She also warned that “in the private market, a reinsurer is supposed to determine how much to charge for a risk. If they are wrong, then the reinsurer is responsible for the loss. If a federal program guesses too low, then the taxpayers bear those losses.” She cited the National Flood Insurance Program as the poster child of a federal coverage gone awry.

The bottom line, as always, is dollars and cents. “There is simply not enough capital, not enough money in the system,” argues Mr. Liddy. “The insurance industry is not built to handle these types of events.”

Yet despite record catastrophe losses, the industry managed to post nearly $29 billion in net income through nine months, thanks in large part to reinsurers paying a big chunk of disaster claims.

This doesn't mean we live in a perfect world. The “good hands” people at Allstate–who paid out over $3 billion in hurricane claims last year–are no longer writing new business in many disaster-prone areas. The carrier argues that a federal reinsurance fund would allow more insurers to write business in such regions. Are they correct, or would such a fund discourage private reinsurers from writing the exposures?

My gut tells me that Allstate's plan, while self-serving, is worth debating. If it is true, as many warn, that climate changes will result in more frequent and severe hurricanes, the private reinsurance market will be hard put to handle many more years like the last two monsters.

Plus, in this, the 100th anniversary year of the Great San Francisco Earthquake, it is not a bad idea to stop and rethink whether how we insure catastrophes–natural or man-made–could be improved before we're overwhelmed by the next event of biblical proportions.