I sometimes wonder if there isn't an insurance executive or twowho ponders whether the industry struck a Faustian bargain when itagreed to partner in the Write-Your-Own program. Essentially, underWYO, private carriers use their paper to write and administer floodrisk, but the government underwrites the exposure.

This relationship can make for awkward policy. For instance, inthe wake of Superstorm Sandy—and I'm certain this is not muchdifferent elsewhere after a natural disaster—policyholders wereupset with the slow pace of settlement or inadequate claimspayment, or both. When it comes to accountability, insurers pointto the Federal Emergency Management Agency, but policyholder's seethe insurers name on the policy and point the finger at them.

This lengthy, aggravating process cannot take place withoutcausing some reputational harm to the company, yet carriers mustfeel the relationship is profitable enough to stay in it; othersmay view WYO as a value added service for their clients worthkeeping.

Getting past the claims process, the National Flood InsuranceProgram is suffering a new rankle—increasing customer's rates. Ifanyone thought the howls from policyholders was loud before, waituntil the bills for the actuarially correct flood risk go out. Inmy little neighborhood on Staten Island some homeowners say theyhave received increases of not a few hundred, but a few thousanddollars. The community is middle to low-middle class and increasesof that sort are just not sustainable.

One answer to lower the premium is to raise the house up abovethe expected highest flood stage. Where do they get the money forthat? Sometimes the only solution is to walk away fromtheir homes because they can't afford the insurance increase or thecost of mitigation.

Hurricane Katrina put NFIP in the hole it's in. Legislatorssought to make the program sound and pay for itself by raisingrates on people who can't afford it; a very shortsighted answer toa long-term, complex issue. Any insurer can tell Congress thatthere are only two ways of achieving a financially sound andself-sustaining program: either charge a high premium to a smallgroup of exposures or increase the pool of insureds and make thepremium affordable to all.

Some in Congress believe the ultimate answer is to abandon floodinsurance altogether to the private sector. That is a fool's dream.Abandonment does not miraculously create a market and the need fora viable solution is growing more urgent.

The reality of global warming is becoming more evident; thethreat of flood is on the rise, which is creating lessincentive for carriers to accept a risk they never wanted toinsure. Carriers will not touch flood for the same reason they stayaway from earthquake in California—they can't afford unsustainablelosses.

Government is not getting out of the catastrophe business—thatis what the people expect government to provide for. Insurers arenot going to accept a risk they cannot adequately price and no onecan afford to buy. However, catastrophe needs to be a sharedrisk—shared by government, industry and the people alike.

The answer? Create an all-risk catastrophe policy and mandateevery homeowner be involved. This is not a new suggestion, but tobe fair and to succeed there must be a shared burden of risk in apublic-private partnership.

Under the plan, insurers share the primary risk and thegovernment acts as reinsurer. Insurers would pay premium to acatastrophe fund. We get rid of flood insurance, the Terrorism Riskand Insurance Act, earthquake pools, Citizens and end some of thepoliticization of disaster because Congress would not need toappropriate relief funds after each event. Because homeowners andrenters face exposure to catastrophic loss they would all have topay for catastrophe risk coverage.

There will be plenty of philosophical opposition to this plan,but what we have today isn't working efficiently or effectively.Maybe it's time to try something radical—or should the word be,“sensible.”