NEW YORK (Reuters) — The National Association of Insurance Commissioners said yesterday it is considering how several states could set up a fund to pay the costs of hurricanes and catastrophes.Such a fund might prove valuable for Gulf Coast states, which were hit by $80 billion in insured losses from hurricanes in 2004-2005, insurers and regulators said.

But such a move would be a blow to the many Bermuda companies whose major market is catastrophe reinsurance in US hurricane-prone areas.

"A multi-state catastrophe fund will allow states to pool their risks in a tax-advantaged fund," said Florida Insurance Commissioner Kevin McCarty, who heads the NAIC group studying the proposal.

This so-called "cat fund" is already a reality in Florida, and the state is doubling it to $32 billion in order to force property insurers to lower rates. The NAIC is now exploring a similar interstate compact as a way to fund catastrophe losses.

Allstate Corp. has proposed a national catastrophe fund that would provide backup coverage for state funds, but the idea has not gained the support of most insurers.

Allstate spokesman Mike Trevino said his company, the largest publicly traded home insurer in the United States, supports the NAIC proposal.

"We believe this is the best way to make insurance available and affordable," Trevino said.

Under Florida's plan, the state would step in as a reinsurer, providing backup coverage to property insurers like Allstate. Insurers who took advantage of the fund would then be required to keep their rates down, because the state would take the loss if there were a major hurricane.

Critics say that if a hurricane hit a major city, losses could exceed $100 billion, swamp the fund and force taxpayers, either state or national, to absorb the rest of the loss.

The NAIC group will meet on March 12 to discuss the proposal as it progresses, according to a statement by the regulators. Because insurance is state-regulated, the NAIC is the regulatory body for most US insurers.