“Look at the FHCF now. It is essentially broke,” he said.

Mr. Collins responded: “It is broke because it has been doing its job, which is paying out claims.”

Mr. Castaldi objected to the notion that there is some sort of capacity crunch, likening the claim to a consumer who feels there is a gas shortage if the price goes over $3 a gallon. “There is no shortage if you are willing to pay the price,” he said.

The only companies he won't insure, Mr. Castaldi said, are those “merely looking for an exit strategy” by grabbing quick market share with unsustainable pricing.

Mr. Collins said market forces could not be relied on overall, since reinsurers are able to charge what the traffic will bear, while their primary counterpart must face state approval for their rates.

As for future solutions, Mr. Collins said an all-perils policy might provide an answer for debates arising out of disputes over insurer denials of storm-surge claims on grounds they are flood damage–thus excluded by policy language and covered by the National Flood Insurance Program.

“Are you beginning to see the possibilities opening up if insurers get the comfort level to take on new risk?” he said.

In other NCOIL news, the group approved a revised market conduct model surveillance act that attempts to eliminate some regulatory discretion when it comes to insurance company examinations.

The revision effort stemmed from the state lawmakers' dissatisfaction with the current model, which was crafted with an eye to meeting regulators' concerns and securing joint sponsorship with the National Association of Insurance Commissioners.

But lawmakers said the fact that the model has garnered virtually no interest in state legislatures indicated it was time to go back to what they were originally seeking in terms of legislation.

The revised model strengthens requirements that commissioners recognize other states' rights to oversee market conduct of the companies domiciled in their state under a concept known as “domestic deference.”

An amendment proposed by the American Council of Life Insurers curbs the right of a commissioner in a carrier's state of domicile to reject the findings of another state's market conduct probe if they initially agree to the inquiry.

It also mandates that any such investigation or examination be conducted on the basis of some market analysis data, and not simply at the discretion of the commissioner.

Iowa Insurance Commissioner Susan Voss, who also chairs the NAIC Market Conduct Committee, was at the NCOIL meeting and signed off on all the changes, asserting they were in the spirit of the efforts her committee was undertaking to streamline the market conduct system.

But she expressed little enthusiasm for taking the revised document back to the NAIC for joint approval, as the original compromise model was approved by a divided NAIC plenary body.

Neil Alldredge, senior vice president for the National Association of Mutual Insurance Companies, said the new bill was an improvement, and his group would actively support it in states where it would represent an improvement over the current system.

Unlike the last effort, consumer groups played a small role in developing the new model.