NEW YORK--A Travelers executive speaking at a rating agencyconference last week said his company's proposal to deal withinsurance issues arising after natural catastrophes now embracesthe concept of a federal reinsurance program.

Distinguishing the concept of reinsurance from proposals for afederal backstop, Eric Nelson, vice president of risk managementfor Travelers Personal Insurance and Small Business in Hartford,said under the Travelers concept insurers would pay the premium forreinsurance coverage of extreme catastrophic events.

The reinsurance feature is a departure from a plan outlined byTravelers Chief Executive Officer Jay Fishman in an Aug. 27, 2007opinion piece published in the Wall Street Journal, which like theplan Mr. Nelson described last week, also includes a limited rolefor the federal government in regulating insurance rates and anemphasis on loss mitigation.

Mr. Nelson discussed Travelers' revised proposal at the Standard& Poor's annual insurance meeting last Monday in New Yorkduring the session titled, "Is A Federal Catastrophe BackstopNecessary or Desirable?"

Also speaking at the conference was Edward Collins, managingcounsel for Allstate, who is also national director ofProtectingAmerica.org., which is lobbying for a system of federaland state backstops to help home insurers with majorcatastrophes.

With him were Stephen Weinstein, senior vice president andgeneral counsel for Bermuda-based RenaissanceRe Holdings, andHoward Mills, chief advisor for the Insurance Industry Group ofDeloitte & Touche U.S.A.

Referring to the proposal being promoted byProtectingAmerica.org, Mr. Collins tried to dispel the notion thatthe ProtectingAmerica is only about government solutions.

"This program is about the private market," Mr. Collinsinsisted. "It does not eliminate private reinsurance. It addscapacity," he said.

Mr. Collins also said that while "people that live on the beachneed to pay all the costs associated with living on thebeach,...they don't have to be exposed to the skyrocketingescalating [insurance] costs that we see after events."

Mr. Nelson said the federal reinsurance mechanism of Travelers'proposal attacks the affordability issue. He explained that mostcarriers don't purchase reinsurance for really extreme tailevents--for hurricanes with losses that are multiples of HurricaneKatrina's losses, suggesting that having reinsurance available fromthe federal government would stabilize the market.

Insurers would give up a portion of profits to pay premiums tothe federal government, which would be based on the loss costs andthe expenses, he said, adding that unlike private reinsurers, thefederal government wouldn't require a profit provision in thepremium.

Travelers' proposal also calls for the creation of fourzones--the Gulf, Florida, Southeast, and Northeast--with thefederal government providing rate and underwriting regulationwithin these zones.

"The basic tenet of insurance is really looking at homogeneousrisks," he said, explaining that the need for the federalgovernment to create a more stable regulatory environment acrossstates lines in areas where hurricane risks are similar.