Taxpayers across the US would face a bill in the hundreds of billions of dollars in the event of a repeat of the hurricane season of 2005, if proposals to provide a federal reinsurance backstop become law.

A report entitled "The Economic Effects of Proposals for Federal Natural Catastrophe Reinsurance and New Loan Programmes: Who Pays the Benefits?" sees many states far away from hurricane zones shouldering huge risk from areas like the Gulf of Mexico coast.

Americans for Smart Natural Catastrophe Policy, a national coalition of environmental, consumer, taxpayer, free market and industry organisations, has urged Congress to look at the findings of the study released by Robert Shapiro, who served as Under Secretary of Commerce for Economic Affairs in the Clinton Administration, and Aparna Mathur, a Research Fellow at the American Enterprise Institute.

The report calculates the burdens on individual states from Congressional legislation to provide state reinsurance loans, create a federal reinsurance backstop to cover state losses, or expand the National Flood Insurance Programme (NFIP) to cover wind damage.

In 2005, hurricanes Katrine, Rita and Wilma caused more than $60 billion of insured losses. A repeat of those storms would hit taxpayers in 20 states particularly hard, the report found. These include California ($19 billion), New York ($11 billion) , Illinois ($7 billion), Pennsylvania and New Jersey ($6 billion each), Ohio ($5 billion), and $4 billion each Massachusetts, Michigan and Virginia, and at least $3 billion for those in Connecticut, Indiana, Maryland, Minnesota, North Carolina and Washington.

The study, which has been backed by the Association of Bermuda Insurers and Reinsurers, which opposes federal- and state-subsidised reinsurance, reports that these massive new taxpayer burdens would be imposed by Congress, despite the fact that private insurance and reinsurance arrangements already in place have worked well.

Many Bermuda reinsurers specialise in property catastrophe coverage and they have seen their market shrink after Florida increased the size of its state catstrophe reinsurance fund. Similar state actions on a wider scale could cost the Bermuda insurance market hundreds of millions of dollars worth of potential future premiums.

The proposed Homeowners' Defence Act would create a federal natural catastrophe back-up fund, and the House-passed version of the Flood Insurance Reform and Modernisation Act would add wind coverage to the NFIP.

Mr. Shapiro and Mr. Mathur demonstrate that the Congressional proposals would displace private capital deployed in insurance and reinsurance companies and, in its place, force enormous financial transfers from taxpayers in most states to some businesses and residents of Gulf states, especially in Florida.

Release of the Shapiro-Mathur economic study comes in advance of the expected convening of a Congressional conference committee to resolve differences between the Senate and the House of Representatives over whether to add wind coverage to the already financially insolvent NFIP, which is $18 billion in debt. The House voted in 2007 to add wind coverage to the NFIP.

This spring, the US Senate rejected such wind coverage by the resounding margin of 74 to 19.

"The findings from this report are alarming, especially in light of clear evidence that climate change is increasing the likelihood of larger and more frequent storms," said David Conrad, senior water resources specialist at the National Wildlife Federation, a member organisation of Americans for Smart Natural Catastrophe Policy.

"The time is now for Congress to weigh not only the enormous financial burden that this fatally flawed legislation would place on taxpayers, but also to consider the fact that these bills would likely encourage irresponsible building and rebuilding in destruction's path, and carelessly putting fragile oceanfront ecosystems in jeopardy."

Research firm Towers Perrinhas predicted losses of up to $200 billion if a federal programme replaces private sector catastrophic wind insurance.

The groups supports the Property Mitigation Assistance Act, sponsored by Homeland Security Committee Chairman Rep. Bennie Thompson. This would offer tax incentives for homeowners to "storm-proof" their properties.

Rep. Thompson's approach serves to promote public safety without creating a massive federal bail-out programme or financially overwhelming the National Flood Insurance Programme, the group argues.