A rift within the property-casualty insurance business over howmuch government help, if any, the industry needs to handlecatastrophes appears to be growing.

Last week, as trade organizations and carriers continuedchoosing sides, the Property Casualty Insurers Association ofAmerica (PCI) announced it was joining ProtectingAmerica.org, agroup supported by Allstate, urging a federal-state system tobackstop insurers after mega-catastrophes.

A portion of property insurance premiums that corresponds withthe catastrophic risk to be covered would be deposited into thecatastrophe funds, where they would grow tax-free. No tax dollarswould be used to support the funds, and insurance companies couldnot use these funds for any purpose other than to pay claims fromcatastrophes that exceed a certain threshold.

Opposing this point of view is American Insurance Association,which represents some of the largest property-casualty insurers.Also in this camp now is Liberty Mutual, one of the largest membersof the PCI.

PCI said it is joining ProtectingAmerica.org because that will"advance its commitment to find a comprehensive solution forcatastrophe management."

ProtectingAmerica.org wants to increase public awareness andconsumer education; advocate for better coordination with local,state and federal mitigation and recovery efforts, and strengthenemergency response and financial mechanisms to rebuild after amajor catastrophe.

One of its goals is to persuade Congress to provide taxincentives for insurers to create catastrophe reserves in order tobetter help the industry cushion itself against a huge loss from asingle event or group of events.

PCI President and CEO Ernie Csiszar explained that he is joiningProtectingAmerica.org because "eight of the 11 largest U.S.catastrophes have occurred in the last five years; with warningsthat more frequent and furious storms are likely to hit our coastsin the near future and the increasing potential for earthquakes inAmerica's heartland, the evidence is clear that America is atrisk."

Mr. Csiszar added, "By coupling our ongoing efforts with thecommitment of ProtectingAmerica.org, we can continue shapingsolutions that address this problem before it is too late."

But an AIA official says there are both philosophical andpractical concerns about the ProtectingAmerica.org approach.

"The reason we are not joining, is that while we agree withProtectingAmerica.org on the need for better preparation and lossprevention in order to keep people and property out of harm's way,we think we must move away from a post-disaster 'spread the risk toeveryone across the country' mentality to a system that honestlyreflects the higher risks and costs of coastal development," saidJulie Rochman, senior vice president for public affairs at AIA.

Two weeks ago, the AIA outlined its own game plan for dealingwith catastrophes, calling for creation of a host of new laws andrules to encourage citizens to take hurricane loss prevention intotheir own hands.

Highlights of the new AIA proposal include creation oftax-advantaged Catastrophe Savings Accounts and state and/orfederal matching grants designed to encourage property owners toinvest in loss prevention tools, such as hurricane-resistant garagedoors and window shutters.

Other proposals eyed by AIA include federal and state assistanceto improve procedures related to claims adjustors to facilitatepayments to disaster victims.

Liberty Mutual cited a recent op-ed commentary in the WallStreet Journal by Edmund Kelly, its chairman, president and CEO asrepresenting its views.

"Instead of looking to government to create special funds,private insurers and public should press to reduce the costs ofnatural disasters before they occur," Mr. Kelly said.

He added, "They could explore incentives for homeowners andbusinesses to make their properties mostly storm-proof; find betterways to protect infrastructure; encourage building-codeimprovements; and develop sensible land-use planning to controlconstruction in the most vulnerable areas."

Mr. Kelly said, "Further, regulatory processes need to allowinsurance pricing to better reflect risks. Those who choose to livein catastrophe-prone areas should not be shielded from theconsequences of their decisions by raising prices for people whoopt for less risky locations."

ProtectingAmerica.org, said last week that it would be pushingits campaign with an advertorial campaign with full-page, opinionoriented advertisements running in the Wall Street Journal, NewYork Times, Washington Post and Washington Times.

The group said the campaign will highlight its web sitewww.protectingamerica.org, and advocate support of H.R. 4366, TheHomeowners Insurance Protection Act, introduced last year by U.S.Rep. Virginia Brown-Waite, R-Fla.

Protecting America is led by former Federal Emergency ManagementAgency director James Lee Witt and former deputy secretary of theU.S. Department of Homeland Security James M. Loy.

"Catastrophe preparation is not strictly a consumer burden.Legislators throughout the country must recognize the need tobetter address how America prepares itself for catastrophe - beforethe next one strikes," said Mr. Loy, a retired Coast Guardadmiral.

This article originally appeared in The National UnderwriterP&C. For the complete article, please click here.