America must be better prepared for major catastrophic natural disasters, an international reinsurance conference was told yesterday.

Edward Collins, national director of ProtectingAmerica.org, a coalition of first responders, emergency management professionals and building code experts, said at the 20th Hawksmere International Reinsurance Congress that a repeat of the 1906 San Francisco Earthquake would cause economic damage of $400 billion.

Taking part in a panel discussion on ?Financing Major Catastrophes ? Who Pays?? at the Fairmont Hamilton Princess, Mr. Collins added: ?The US Geological Survey and the Southern California Earthquake Centre released a study in May, 2005, warning that an earthquake on the Puente Hills fault under Los Angeles could kill 18,000 people and cause $250 billion in property damage.?

The debate on mega-catastrophes and payments has particularly resonance in Bermuda because of the growth of the catastrophe reinsurance industry on the island. Last week XL Capital CEO Brian O?Hara said the US suffered approximate losses of $58 billion from August, 2004 to October, 2005 due to hurricanes and floods and the Bermuda insurance industry was likely to pay out almost $20 billion of those claims.

Mr. Collins, managing counsel if US insurer Allstate, said the forecast for future catastrophic events involving hurricanes, floods and earthquakes was ominous.

?We should be very proud of our industry and the claims professionals for, in unbelievable circumstances, taking care of consumers. It is wonderful that there is new capital coming into the reinsurance market but the capacity is certainly limited and strained and the capacity that is coming is a fraction of what was sucked out of the market in 2004-2005.?

Mr. Collins said while the level of risk is rising, the level of protection is declining.

?This is more important than it has ever been because so many American consumers? financial security is in their homes and for many their entire financial retirement security is in their homes.?

He said people in the US are migrating into high risk areas as people have an infatuation with warm weather and property values in coastal areas in the US have increased.

?If an earthquake the size of the New Madrid Quake occurred there today, tremors would be felt through half of the US and damage could be expected in 20 states or more,? he said.

The New Madrid Fault System lies in the Mississippi River Valley, extending 150 miles southward from Missouri and crossing five state lines.

?The damage to pipe and gas lines, subway tunnels, railroads, and waterways would stop productivity in the Midwest and Eastern US and could produce losses 20 times more those caused by the Northridge, California earthquake in 1994.?

Mr. Collins said living on known faults without earthquake insurance, building in a flood plain without flood insurance, allowing brush to grow unchecked in areas prone to wildfire and building homes in coastal areas exposed to hurricanes is irresponsible.

He said stronger building codes, vigorously enforced and sensible land use policies are needed to reduce the impact of catastrophes on consumers and taxpayers.

Addressing the question of who should pay for natural catastrophes, Marsha Cohen, senior vice president and director of sate relations, Reinsurance Association of America, said she does not support state or government intervention in the marketplace.

?We believe that financing State and Federal Cat funds are not the answer.

?A state catastrophe fund violates the fundamental tenets of insurance ? spreading the risk, resulting in the risk concentration burden being shifted onto the backs of taxpayers.?

She said natural disasters are an insurable risk and the private sector can find solutions for coverage but Government and the private sector should work together to find solutions to protect consumers.