WASHINGTON--Insurance industry groups appearing yesterday at a House Financial Services Subcommittee hearing argued vigorously against an increased government role for insurance against natural catastrophes.

At the hearing, members of Congress, including three representatives from Florida and Rep. Gene Taylor, D-Miss., appeared as witnesses to describe insurance problems facing homeowners along the Gulf and Atlantic Coasts and to give their views on how the government can help ease the situation.

Rep. Taylor, who filed a lawsuit against State Farm over the handling of his own Hurricane Katrina claim , which has been settled, has been among the most ardent critics of the insurance industry since that storm.

Yesterday he again blasted the industry's claims handling practices and said that only those homeowners who stayed to watch their houses be destroyed in the storm were treated fairly by their insurers.

Since then, he said, insurers have abandoned the area, or are now charging unaffordable rates for coverage. The government, he said, should "step in where the private market won't" and offer multiperil coverage for homeowners.

Insurance groups, however, argued that any solution to the issue of coverage should be based more in free market principles than increased federal involvement.

"The question lawmakers ought to be asking is what mix of policies will maximize the private sector's ability to provide property insurance in disaster-prone areas while minimizing the risk associated with living and doing business in these areas," Chuck Chamness, president and chief executive officer of the National Association of Mutual Insurance Companies, said in remarks submitted to the committee.

In testimony at the hearing, American Insurance Association President Marc Racicot said that an overwhelming majority of claims in the wake of Katrina have been settled, and many of the more punitive measures being proposed, including a repeal of the insurance industry's limited antitrust exemption, would ultimately do more harm than good.

"They will do nothing to improve the availability or affordability of coastal insurance, and instead will have a serious and detrimental effect on the markets they purport to assist," he said.

Anne Spragens, senior vice president, secretary and general counsel for the Property Casualty Insurers Association of America, said that there could be a role for the federal government to play in catastrophe insurance, but that it should take the form of liquidity protections and occur only "at a very high level" as companies pay claims in the aftermath of an event.

Among the proposals to help ease the affordability and availability issues for homeowners along the coast is the potential sale of reinsurance by the federal government, either directly to insurers or to state catastrophe funds.

Frank Nutter, president of the Reinsurance Association of America, said that such a plan would run afoul of the basic principle of insurance by concentrating the risk within a particular area. Florida already has a state catastrophe fund that offers reinsurance, and Mr. Nutter said that such a system places the burden of a catastrophe on taxpayers.

"The effect is that insurers have off-loaded a substantial part of their property risk to a government catastrophe fund, and that government fund assesses its citizens to make up for the revenue shortfall caused by low upfront catastrophe fund reinsurance premiums," he said. "Policyholders from all lines of insurance, including those at low risk to catastrophes, are being required to insure insurance companies."

Private market reinsurers, he said, can spread that risk throughout their operations around the globe, and Congress should focus instead on removing the constraints placed on the reinsurance market such as price controls or coverage mandates.

"By removing regulatory constraints, policymakers will maximize private sector risk bearing," he said.