BATON ROUGE, La.

Allstate Insurance Co. bought reinsurance to cover some of the cost of policies all along the East Coast last year, but not for Louisiana - a gamble that cost it $2 billion in claims.

The company's models did not predict a hurricane hitting Louisiana, attorney Edward Collins told a joint legislative insurance committee last week. It did buy reinsurance in Texas and Florida, as well as New York and other Eastern states, he said.

"You didn't take care of your business, so the citizens of Louisiana have to pay for your mistake?" asked Sen. Don Cravins, D-Opelousas. "Now that you've had a loss, you put the burden on the backs of Louisiana citizens to pay for your shortcomings."

Insurance companies by reinsurance for the same reason home and business owners buy insurance: to avoid paying the whole bill for damages. Even if it had done so for Louisiana, officials said, the company would still be revoking wind and hail policies in 18 coastal parishes.

"Even if we had $2 billion in reinsurance, we would still be pursuing the actions we're pursuing," spokeswoman consultant Kate Hollcraft said "We were trying to do the responsible thing.

"I don't know how responsible it would have been to purchase reinsurance if we had not needed it," Hollcraft said. "And no amount of reinsurance could prevent a hurricane from striking."

Allstate plans to drop wind and hail coverage on 30,000 homeowner's policies. Buyers who have both homeowner's and auto policies - about 110,000 customers - won't be affected.

During the more than three-hour hearing, senators and representatives pushed Collins for commitments the company would not pull out of the state if it does not get to cancel wind and hail coverage in coastal parishes, as it plans to do starting Jan. 1.

Collins said that was always an option but not one the company plans to use, especially when Allstate believes it can withdraw wind and hail coverage.

Commissioner of Insurance Jim Donelon has pledged to fight that as a violation of state law.

"We don't read the statute the way the commissioner reads the statute," Collins said.

Cravins was among lawmakers saying Gov. Kathleen Blanco should call a special legislative session about insurance. Others said that would be useless without a specific plan.

Collins said Louisiana might create a fund like Florida's to help cover catastrophic losses. That fund is tapped if companies suffer total losses of at least $5.5 billion.

Some lawmakers said insurance companies are supposed to create their own reserves.

Something needs to be done to shore up the industry, Collins said, because "there's no doubt the Atlantic conveyor belt is in high gear" with stronger hurricanes.

Under state law, companies cannot cancel or significantly change policies after three years of service unless the company is financially unstable, the policyholder has filed three or more claims, there is a change in peril because of a change in the property, or the company is withdrawing from all coverage in the state.

Wind and hail coverage in South Louisiana makes up 40 percent to 50 percent of the cost of a policy, said Chad Brown, chief of staff for the insurance commissioner. "If that's not a significant change in policy, I don't know what is. And a change in climate is not a change in peril."

Collins said other states do not have such a law. Allstate pulled such coverage for 95,000 customers in Florida last year and is "transferring exposure" of 140,000 more to other companies this year, he said.

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The Associated Press

Information from: The Times

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