by: Greg Allen, NPR

In some big states like Florida and Texas, hurricane catastrophe funds don't have enough money.

'Not Actuarially Sound'

Let's start with Florida. With its 1,200 miles of coastline, no state is as vulnerable to hurricane damage. After the active hurricane seasons of 2004 and 2005, Florida greatly expanded its state-run insurance program.

Today, that insurance company, Citizens Property Insurance, writes policies for nearly one-quarter of the state's homeowners. Eli Lehrer, who follows insurance markets at the Competitive Enterprise Institute in Washington, says that's a problem.

''The level of liability that Florida has taken on through the state government is unprecedented,'' Lehrer says.

It's estimated that Florida has a total of some $2 trillion in property exposure — much of it insured by Citizens.

The problem is that the public insurance company is underfunded, because for years, it has been charging rates that are, as they say in the trade ''not actuarially sound'' — in other words, too low.

Lehrer believes this has happened for political reasons — because wealthy, well-connected Floridians tend to live on the coasts.

''Well-off Floridians have lobbied their state Legislature to pay lower rates. And, for the most part, they've managed to do so at the expense of many residents, including residents who are poorer than they are,'' Lehrer says.

Florida's Legislature recently took action to raise rates in the state-run insurance company, but it will be years, analysts say, before they reflect the true cost of providing insurance in coastal areas.

Cat Fund

Like some other coastal states, Florida also sets aside cash and bonds in what's called the hurricane catastrophe fund — the ''cat fund'' for short. It doesn't kick in unless there's a big hurricane and private insurers and the state-run program have depleted their reserves. But, as of now, even top state officials concede the fund is at least $12 billion short of the amount needed if a big hurricane hits.

But how much is enough? Walt Dartland with the Consumer Federation of the Southeast notes that in Florida, Hurricane Andrew remains a perennial guide and caution. It did $25 billion in damage. But that was 17 years ago and a storm that hit well south of Miami. Dartland believes a direct hit by a big hurricane on a major population center today would far eclipse that.

''I'm willing to bet that with the cost of materials, the cost of rebuilding, it could easily be triple or quadruple that. It could be a $100 billion hit, and that's what worries me,'' Dartland says.

Other coastal states in the Southeast are looking at varying degrees of the same problem — potential liabilities that far exceed the reserves of state funds and private insurance companies.

A Familiar Dispute

In Texas, Gov. Rick Perry says it's an emergency situation. The problem is with the state-chartered insurance fund that covers most coastal residents. After hurricanes Dolly and Ike, which hit Texas last summer, the fund is broke.

And legislators in Texas so far have been unwilling to take steps to raise rates statewide and to fix the ailing windstorm program.

Sandra Helin of the Southwest Insurance Information Service says it's a familiar dispute.

''The inland folks don't want to feel like they're subsidizing the coastal policyholders. Then, you have the coastal policyholders who feel that they bring so much to the state economy,'' Helin says.

Alternative Funds

A similar dynamic plays out nationally. Florida and other coastal states have long pushed for a National Catastrophe Fund that would help spread the risk from hurricanes, earthquakes and other natural disasters.

As a candidate, Barack Obama said he supported the idea. Even so, it's gone nowhere, and in Congress, a new plan has emerged. Florida Democratic Sen. Bill Nelson has proposed having the federal government guarantee loans that states take out after a catastrophe.

It's ''cat fund light'' — and although it has the support of officials in Florida, California and other coastal states, its prospects are uncertain.

Alex Sink, Florida's chief financial officer, says after a catastrophe strikes, the federal guarantee would enable states to issue bonds to pay off claims.

She says it wouldn't cost the federal government a dime. And, let's face it, Sink says, if a major hurricane devastates Florida or any other state, the federal government will be involved.

''Look, the country stepped up after Katrina in a big way. I think in a catastrophe like we're talking about here, I think the people of the country and the Congress would come through for us,'' Sink says.

By putting loan guarantees in place beforehand, Sink says the federal government would help states prepare and, at the same time, reduce the amount of aid needed after a hurricane strikes.