The increased insurance rates are an unfortunate byproduct ofthe severe 2005 storm season, the most active since record-keepingbegan in 1851. It was also the most costly year on record for theinsurance 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 withthe US in the early stages of a 15-year cycle of projectedincreased hurricane activity, meteorologists are forecastinganother very active storm season for 2006.

The term "catastrophe" in the property insurance industry is anatural or man-made disaster that is unusually severe and thataffects many insurers and policyholders. A single event isdesignated a catastrophe when claims are expected to reach acertain dollar threshold, currently set at $25 million. Lastmonth's Washington Insider, by Jeanne McGlynn Delgado of theNational Multi Housing Council, treated how o manage insurancehikes. I thin it's important to build on that foundation withconsideration of some of the forces impacting catastrophicinsurance pricing and the public policy debate surrounding thisissue.

As we enter into the 2006 storm season, the nation's insurancemarketplace is strained due to the number and severity ofhurricanes in recent years. The availability and affordability ofproperty insurance in coastal areas is deteriorating. The keychallenges that the insurance industry faces are: