REALITY: The private insurance industry has insured wind and earthquake risks, including the unprecedented losses of the 2005 hurricane season.

• Of the top 10 most costly world insurance losses from 1970-2005, three are 2005 natural catastrophes (Hurricanes Katrina, Rita and Wilma) that occurred in the U.S.

Despite record insured catastrophe losses that year of $72.7 billion (Hurricane Katrina alone cost insurers $40.6 billion), the insurance industry was profitable. Although the combined ratio for homeowners insurance averaged 111.8 from 1990 to 2006 (meaning insurers paid out [in claims and expense] an average of $1.12 for every dollar taken for premiums), homeowners insurers averaged a rate of return of 3.3 percent through 2006.