Florida, Texas, Louisiana and Massachusetts have followed the example of the federal government and started their own insurance operations. Florida's state-funded Citizens Property Insurance has underwritten more than 1.3 million policies since its start in 2002. Some states have also taken steps to minimize the losses of private insurers.

In January, for instance, Florida Gov. Charlie Crist signed into law regulations that cap insurance company losses at roughly $23 billion annually. Under the measure, the state will cover all claims in excess of the limit.

The state "made the very calculated decision to act as a reinsurance carrier," says state Rep. Janet Long (D), a member of the Committee on Insurance and cosponsor of the legislation. "As long as we go along for a few years and we don't have any major catastrophic losses, this positions the state financially very well."

Who's to Blame

To avoid price gouging, consumer advocate Newton and scientist Mills urge insurance companies to be transparent about the models they use for setting premiums—specifically how they factor in catastrophes believed to have been brought on by climate change. "We're looking at the global warming surcharge and asking them to back it up," Newton says. There are currently no state or federal laws requiring that companies provide this information.

Industry representative Snyder dismisses the notion of a "global warming surcharge." "What insurers are doing," he says, "is pricing as accurately as they can for the risk, which seems to be increasing significantly, from whatever cause, leading to more intense and greater numbers of serious storms."

Mills stresses that there is a lot more going into premium increases than just new models that factor in climate change, including population increases along the coast, deterioration of infrastructure such as levies, and destruction of naturally protective wetlands. "Even if climate change wasn't happening," he says, "we'd be expecting insurance losses to be going up."

Mills predicts that more states will get into the insurance game as their denizens are deemed "uninsurable" by private industry. "It certainly comes back to the taxpayer in the end," he notes.

Snyder says the long-term solution is to try to limit property damage by improving land use and enforcing building codes already on the books. In this respect, insurance companies have a role as advocates for preventive measures that decrease consumers', and, therefore, insurers' liability. (One of the ways insurers have accomplished this in the past, for instance, was to push for greater motor vehicle safety.) By this logic, a government spurred to action by citizens and private industry can enforce smart development rather than becoming an insurer.

According to Mills, the bottom line is that in the aftermath of hurricanes Katrina and Rita, private insurers have been dropping coverage and hiking rates, leaving states and consumers holding the bag.

Rep. Long echoed that sentiment. "We're working very hard to try and level out, to try and give people some breathing room," she says, "but I can tell you that over the long haul it's going to continue to be a major issue, finding affordable coverage for Floridians, because we live in a volatile part of the world."

The same could be said for every other U.S. citizen who is lucky, or unlucky, enough to live on or near the water.

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