Ruoff's major objection to the CFA report is that it failed to use data specific to the homeowners market, such as the examination of market cycles.

CFA contends that the insurance-market cycles over a multi-year period indicate that catastrophes are not as big a problem as they once were for the industry's earnings.

Ruoff points out in his newsletter that from 1967 through 2011, carrier operating income closely follows U.S. GDP.

In an interview, Ruoff says the homeowners market is 12 to 14 percent of the total insurance market and the researchers should have isolated those earnings for review to make their point. He says that whoever did the research was not familiar enough with the insurance business “to do an adequate job.”

He says CFA's criticism that the property and casualty industry has excessive surplus is “not a rational conclusion.” While surplus for the industry stands at more than $580 billion, Ruoff notes that “it supports a lot of other risks” and the figure cannot be viewed as supporting just the homeowners market.

He does agree that Hurricane Andrew marked a turning point for the industry. But he differs on the reason for the change in the industry's direction. Up until Andrew, insurers were taking on too much risk and coming too close to opening the door to insolvency. He says Andrew was the wake-up call, and ever since, insurers have worked to refine their focus on risk and remain solvent.

Since Andrew, Ruoff says, carriers have become more dedicated to specific markets. A number of major carriers that once wrote P&C business have left the market, while others concentrate their risk profile in specific markets. An examination of the marketplace reveals that there are fewer carriers willing to write homeowner's insurance than there were 20 years ago, and a significant portion of that market is written by just a few carriers.

Ruoff says he does agree that regulators should be taking a more aggressive stance to ensure that policy language protects homeowners and triggers are not put in place that adversely affect the policyholder.

For instance, when a storm once classified as a hurricane enters a state is downgraded to a tropical depression, policy language should not allow insurers to invoke a hurricane wind deductible, he says. Regulators may get the carrier to change their minds, but the regulators should have preempted the situation by making sure the language was clearer.

Regarding the flood program, he says there would be more underwriting of flood by insurers if the National Flood Program's rates were actuarially sound. But to keep the coverage affordable for homeowners, the government is subsidizing the program, and insurers cannot write coverage at the current rates, says Ruoff.