The increased insurance rates are an unfortunate byproduct of the severe 2005 storm season, the most active since record-keeping began in 1851. It was also the most costly year on record for the insurance industry, with insured losses from Hurricane Katrina at $40.6 billion and total catastrophe losses for the year totaling $61.2 billion (source: Insurance Information Institute). As with the US in the early stages of a 15-year cycle of projected increased hurricane activity, meteorologists are forecasting another very active storm season for 2006.

The term "catastrophe" in the property insurance industry is a natural or man-made disaster that is unusually severe and that affects many insurers and policyholders. A single event is designated a catastrophe when claims are expected to reach a certain dollar threshold, currently set at $25 million. Last month's Washington Insider, by Jeanne McGlynn Delgado of the National Multi Housing Council, treated how o manage insurance hikes. I thin it's important to build on that foundation with consideration of some of the forces impacting catastrophic insurance pricing and the public policy debate surrounding this issue.

As we enter into the 2006 storm season, the nation's insurance marketplace is strained due to the number and severity of hurricanes in recent years. The availability and affordability of property insurance in coastal areas is deteriorating. The key challenges that the insurance industry faces are: