"... We have seen some major catastrophes, weather-related, with the hurricanes, for example, flooding -- even tornados this year. And a big question that economists debate is whether you can have an insurance market –- a private insurance market -- that functions when you have these relatively infrequent yet very catastrophic losses," says Dr. Walden, an agricultural and resource economics professor with the College of Agriculture and Life Sciences.

"I mean, typically the way an insurance market works is you are able to predict your losses. You may not be able to predict who suffers a loss, but you would be able to predict the dollar amount of losses each year. Therefore, you can structure your premiums to cover that.

"With these big catastrophic losses where a particular area -- for example, North Carolina -- may not be hit by a major flood such as the ones we suffered with the hurricanes in a hundred years, it is very hard to predict those losses and figure those into your premiums.

"So if a private company can, for example, be willing to wait long enough to recover their costs, then I think a private insurance market can work.

"Otherwise some economists say this is one area where the government may have to step in."