As New Orleans antiques dealer Bill Rau labors to rebuild his business after Hurricane Katrina, h... Nation struggles with natu

As New Orleans antiques dealer Bill Rau labors to rebuild his business after Hurricane Katrina, he's finding that getting insurance against future storms may be one of his biggest obstacles.

Even as he negotiates with 14 insurance adjusters over damage to his property, Rau worries that he won't be able to get affordable coverage for his shop on Royal Street, a block from the Bourbon Street bars and cafes. He's been able to get property and casualty insurance coverage only until Jan. 1, and doesn't expect his carrier to renew the policy.

"I think what's going to happen is that a number of insurance companies are going to pull out," Rau said. "Those that don't are going to be so ridiculously expensive that many businesses won't be able to afford the coverage."

Insurers' willingness to provide coverage is pivotal to how well New Orleans and other areas recover from the devastation wrought by Katrina and the hurricanes that followed. But some insurers intent on limiting future losses are considering pulling out of the Gulf Coast or reducing the number of customers they serve, just as insurers have done in Florida during the past decade.

It's an issue with implications well beyond hurricane regions -- no part of the nation is exempt from the possibility of a financially devastating catastrophe, whether it be a terror attack or a killer storm.

Businesses and homeowners across the country are already feeling the impact of the insurance industry's problems, including higher premiums and deductibles while insurers recoup hundreds of billions of dollars in losses from this year's storms. Longer-term, the question is whether the insurance industry can continue to absorb such massive losses without some federal guarantees or state reinsurance pools.

"If you can't get insurance, you can't borrow money, you can't build inventory, you can't protect your workers, you can't exist," said Mark Drennen, president and chief executive of Greater New Orleans Inc., the city's economic development group.

There are a handful of specialized disaster insurance programs available. For example, the Sept. 11, 2001, terrorist attacks in New York and Washington, D.C., prompted Congress to enact the Terrorism Risk Insurance Act, which would provide funds to the insurance industry if there are devastating terror attacks in the future. But the TRIA program expires at year's end, and several congressional committees are debating terms for its renewal.

When it comes to natural disasters, there are programs such as the federal flood insurance and the California earthquake coverage, but no comprehensive backup to deal with mega-catastrophes.

But Ernie Csiszar, president and chief executive of the Property Casualty Insurers Association of America trade group, said this year's storms could wipe out one-fifth of that.

He added that estimates of the potential damage caused by a massive earthquake in San Francisco indicate "it is not beyond the realm of belief to think it would be a $400 billion catastrophe," the equivalent of the industry's total surplus.

State insurance commissioners, however, say the current system isn't working. Disputes over policy coverage and delays in payouts are slowing rebuilding in New Orleans and other areas, making the region more dependent on federal emergency aid and reconstruction money. And it remains unclear whether homeowners and businesses will be able to buy adequate coverage if they do rebuild.

Csiszar of the PCIAA said there were mechanisms the industry could try to adopt, such as issuing catastrophe bonds or the creation of private catastrophe pools, to try to prepare for a mega-disaster, but that these likely would require hard-to-win changes in tax and accounting rules. State catastrophe funds, perhaps backed by a federal fund, could also work, he said.

Even if there is a move toward a national program, it won't work unless more is done to make sure that structures are built to withstand major storms.

J. Robert Hunter, a former Texas insurance commissioner who now works with the Consumer Federation of America advocacy group in Washington, D.C., has argued against renewal of the federal terrorism program and cautioned against anything similar for natural disasters.

''The risk to taxpayers under such a program is that it will unjustifiably subsidize the insurance industry or encourage faulty construction in areas at high risk for natural disaster,'' he argued.

Tom Murphy, chairman and chief executive of Miami-based Coastal Construction, a contracting firm that specializes in condominiums and office buildings, said that changes in Florida's building code since Hurricane Andrew in 1992 have led to homes and offices that better withstand hurricanes.

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