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John Lobert is a legislative and regulatory affairs lawyer. His firm, Lobert Legislative & Regulatory Consulting, provides public policy advice and planning to both the insurance and reinsurance industries.

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The trade and mainstream press will soon be filled with articles commenting on the five-year anniversary of Hurricane Katrina—the largest insurance event in history and certainly one of the deadliest. Rather than look at the accumulated statistics, I thought it would be interesting to ask the question, “Have the Atlantic and Gulf Coast state insurance markets prepared for the next big hurricane?”

Looking back over the past five years, Mississippi, North Carolina, and South Carolina get my vote as states that are clearly better prepared to handle the Big One then they were five years ago. Louisiana, however, remains a question mark. The state’s insurance mechanism seemed to function pretty well after Katrina, with the state-run Citizens plan filling its role as envisioned, and the recoupment mechanism working as planned. The flip side of the coin, however, is that Louisiana policyholders will continue to pay assessments to repay the debt incurred by Citizens for many years to come. The fact that the private insurance industry remains interested in investing in Louisiana is a testament to the hard work of Insurance Commissioner Jim Donelon, who recognizes that every dollar the industry invests is one that the citizens (and Citizens) of Louisiana don’t have to shoulder.

As I’ve written before, Florida remains in a class of its own since Governor Charlie Crist has adopted a largely faith-based approach to hurricane preparation—that is, a combination of praying that a devastating hurricane doesn’t hit Florida during his regime and ceaseless flogging of an insurance industry that would like nothing more than to be able to fairly shoulder the burden of risk in the state.

Fortunately, a number of policymakers in other states adopted the motto, “We don’t want to be like Florida,” and have worked to make some difficult, and often unpopular, decisions to prepare for the next Big One.

Mississippi enacted a measure to reform funding of its wind pool, the Mississippi Windstorm Underwriting Association, almost immediately following Hurricane Katrina, because some insurers in that state found themselves with assessments to fund wind pool losses as high as six times annual written premium. Without significant reform, companies might have made a run for the border. (Of course, catastrophe funding was only half of the problem in Mississippi. Litigation following Katrina, with the possibility that the courts, and the former state attorney general, might re-write the insurance contract, was an even greater concern—but that’s a topic for another day.) Among its provisions, the 2007 reform bill created a method whereby insurers could recoup assessments, and it mandated wind pool pre-loss funding equal to an estimated 1-100 year loss. While Mississippi may still have its problems and wind pool growth remains a concern, the state took giant and immediate steps forward to provide some stability to the marketplace.

North Carolina pulled its head out of the sand and tackled beach plan reform in 2009. Then newly elected Insurance Commissioner Wayne Goodwin made it clear that it would not be business as usual as it had been under long-time Commissioner Jim Long. Commissioner Goodwin and his staff worked diligently on a beach plan funding compromise guaranteed to make everyone unhappy—and that’s a good thing. The 2009 reform effort included reducing available limits in the Beach Plan (to throw out the wealthiest homes), providing for a huge (but consistently predictable) nonrecoupable assessment upon insurers to fund Beach Plan shortfalls, and providing for surcharges on policyholders statewide if needed to fund the most devastating losses. This last provision was certainly a hard one to sell (especially for an elected Commissioner). But for a state where coastal tourism benefits the entire state, it’s fair. The North Carolina reform law also puts pressure on the Beach Plan board to maintain adequate reinsurance, arguably the number one factor in bringing confidence to the private market as a well-funded residual market significantly reduces the likelihood of post-loss assessments.

South Carolina gets my vote for its overall approach to the problem of natural catastrophes. The state’s 2007 reform bill sought to address a problem with hurricanes, not with insurance companies, and included something for all stakeholders. Insurers were required to provide mitigation credits and prohibited from certain rating activities; tax credits were established to encourage property owners to strengthen their homes and to help offset the costs of insurance premiums for some; and changes were made to the South Carolina Wind Pool to assure that it remains the market of last resort and to strengthen pre-loss funding.

The other Gulf and Atlantic coastal states not mentioned here have done nothing meaningful to prepare, but on the bright side, they haven’t ruined the market as Florida did.

Congress, for its part, has floated a number of natural disaster funding proposals. Measures that would have enacted a federal backstop over state residual market plans or placed the federal government squarely in competition with the private market (such as Rep. Taylor’s plan to add wind coverage to the National Flood Insurance Program) have thus far failed to pass. This is probably for the best, as every plan proposed so far has had the clear potential to artificially suppress (or further suppress) the true cost of catastrophic risk, with the likelihood of hurting the private market and providing a disincentive to mitigate losses.

While we’re on the subject, the one clear, critical task that Congress absolutely had to do was to reform the National Flood Insurance Program (NFIP). Yet, after how many attempts, the NFIP remains virtually unchanged—offering outdated coverages and still buried in a debt of nearly $20 billion dating back to the 2005 Hurricanes Katrina, Rita, and Wilma.

So, is everyone prepared for the next Big One? Not a chance.