NEW YORK--Insurance regulators from two coastal states sparred yesterday over what the federal government's role should be in solving catastrophe insurance problems, with one saying the government should not intervene until insurers are essentially on life support.

Appearing during a panel of regulators convened at the Property-Casualty Joint Industry Forum here, Scott Richardson, South Carolina Insurance Department director, said, "I don't think we should go to a federal solution until we're on our backs, bleeding to death and breathing our last breath."

Mr. Richardson was reacting to a suggestion by James Donelon, commissioner of the Louisiana Insurance Department, who proposed a system of private insurance covering all perils backstopped by the federal government.

"A federal fix is the ultimate solution, but it has to be based on the private sector," said Mr. Donelon. As an example, he said, "I'd get the federal government out of flood insurance and make an all perils [policy] for earthquake, flood and wind coverage with a federal backstop in place and/or a federal tax-free reserving program."

Mr. Richardson, disagreeing that there's a role for the federal government in the ultimate solution to catastrophe insurance problems, warned about a possible snowball effect from letting the federal government into the business of insurance.

"I don't want to be dramatic about it, but once you go down that road" and start letting governmental entities--state or federal--"take over pieces of the industry, most of the time legislators don't know where to stop doing that," he said.

Mr. Richardson worries that the U.S. insurance market is "getting more socialistic" while the rest of the world is moving in the free market direction he embraces. "We're swimming against the tide," he said.

"I want to see the insurance industry take control of the insurance industry," he said. "I think we have walked away from our responsibility to solve some of the problems that we have."

Mr. Donelon voiced particular concerns about the possibility that an earthquake in San Francisco would someday do more damage than Hurricane Katrina did in New Orleans in 2005, where he said only 15 percent of properties are insured.

"They're waiting on the mother of all Road Home programs," he said.

The Road Home is a collection of housing programs designed to help residents of Louisiana affected by Hurricane Katrina or Rita get back into their homes quickly and fairly, funded by the U.S. Department of Housing and Urban Development.

The Road Home Web site says the program, created by Louisiana Governor Kathleen Blanco, the Louisiana Recovery Authority and the Office of Community Development, is the largest housing recovery program in U.S. history.

Earlier, Mr. Donelon explained why a state catastrophe fund was not a workable solution to catastrophe insurance problems in Louisiana. Private insurers paid out $24 billion in Louisiana for Katrina claims, while FEMA paid out another $16 billion for flood claims, he said, contrasting the $40 billion total to $9 billion in state tax revenues generated annually.

"We can't afford to do anything meaningful in that [state cat fund] arena," he said. "Even our press in Louisiana understands the folly of trying to replicate what Florida did in their special session last year," he added, referring to Florida property insurance reforms that increased the size of the Florida Hurricane Catastrophe Fund.

Instead of going down the cat fund road, Mr. Donelon reported that the Louisiana legislature created a program earlier this year to entice insurers to come into the Louisiana market by offering economic incentives. The $100 million program was launched on Nov. 1 in an effort to increase private market capacity by 15 percent.

This Friday, Mr. Donelon said he is scheduled to join Gov. Blanco on her last day in office in handing out $30 million in incentive checks to a half-dozen "good, strong companies."