Allstate Chairman and Chief Executive Officer Edward Liddy,continuing his campaign for a federal catastrophe fund, told agroup of reporters in Washington that his industry lacks thecapacity to handle huge multiple natural disasters.

Mr. Liddy, whose company has done advertising on behalf of anational catastrophe fund after the company had losses of more than$3 billion from Hurricanes Katrina and Rita, made his pitch at theNational Press Club in Washington.

In addition to pumping his catastrophe concept he also put in aplug for optional federal chartering of insurers.

Mr. Liddy's catastrophe fund concept was first advanced at aCatastrophe Summit this summer in San Francisco. It envisions afederal catastrophe pool being established to serve as a backstopfor individual state pools. The idea drew backing then frominsurance regulators from California, New York and Illinois.

These pools, he said, would allow for the states and the federalgovernment to prepare for a major catastrophic event that couldoverwhelm the insurance industry.

"There is simply not enough capital, not enough money in thesystem," to handle major catastrophic events such as HurricanesKatrina and Rita, Mr. Liddy said. "The insurance industry is notbuilt to handle these types of events. We're built, really, as anindustry, to deal with events that are much more predictable."

A bill to establish a federal catastrophe pool has beenintroduced in the House by Rep. Ginny Browne Waite, R-Fla., andRep. Clay Shaw, R-Fla. Mr. Liddy said Allstate is working to form acoalition to support the bill in Congress this year.

Although work to build that coalition has only begun in recentmonths, Mr. Liddy said he would like to see representatives fromthe National Association of Insurance Commissioners as well asbuilding trades, the realtors and "all the people who benefit fromthe housing market" join the effort.

Additionally, by having state pools as the first line ofprotection, the system would avoid charges of one area subsidizingthe insurance for another. "We are not suggesting that people inIowa fund the good life for people living in Florida, SouthCarolina or Georgia," Mr. Liddy explained.

Mr. Liddy added that establishing this two-tiered system wouldincrease the availability of coverage. Allstate itself has stoppedwriting new policies in Florida, Louisiana and the New Yorkmetropolitan area, including Westchester County and Long Island.However, with a state and federal catastrophe backstop in place,Mr. Liddy said, "we'd sell more insurance."

Catastrophe pools already exist for hurricane damages in Floridaand earthquakes in California, and Mr. Liddy noted that officialsfrom other major states such as Illinois and New York support theconcept.

Critics of the federal catastrophe fund proposal have arguedthat establishing such a pool would be unnecessary and that majorcatastrophes can be and are insured, pointing to the post-Katrinainflux of capital into the reinsurance market as proof of theindustry's capabilities.

However, Mr. Liddy said this was misleading, and that while$10-to-$12 billion in new capital has moved into the reinsurancemarket, the hurricane season of 2005 is currently estimated to havecaused between $60 billion and $80 billion in damages. "Do themath," he said.

Given that the recent extension to the federal Terrorism RiskInsurance Act passed only days before it was set to expire, Mr.Liddy acknowledged there might be an unwillingness on the part oflawmakers to get involved in what could be perceived as a similarprogram. (The TRIA framework provides government support forinsurers when terrorist events hit certain loss levels.)

He said the federal catastrophe pool is actually a "wholedifferent concept" than the TRIA program in that it would be fundedprospectively; with states and policyholders paying into the fundrather than having the government recoup losses afterward as wouldbe done under TRIA.

Another goal for some in the insurance industry has been theestablishment of an optional federal charter, which Mr. Liddy saidis necessary to "free up the insurance industry" and spur moreinnovation.

As an example of how insurance could be regulated federally, hepointed to the system currently employed by the banking industry."I think the banking industry is a very interesting parallel," hesaid. "I think that is a model that's worked very well in theUnited States."