Hurricane Opal may cost up to $2 billion, according to the National Association of Independent Insurers. But the next one could cost $3 trillion if it managed to wipe out insured property along the Atlantic and Gulf of Mexico coasts, the association claims.

The crisis in reliable insurance coverage in the sunshine state threatens one of the most enduring American dreams - retiring or buying a vacation condo in the land of orange juice and big fishing.In the meantime, the American Insurance Association has criticized the recommendations contained in a report released in August by the Florida Academic Task Force. The report addressed the problems springing from the fact that commercial insurers do not want to do business in Florida, and that the state's funds are beleaguered.

The report, "Restoring Florida's Paradise," strongly urged the state to take the majority of hurricane risk out of state-funded pools and the two commercial insurers where it now rests, and spread it among a large number of private insurers. The task force also proposed merging the two state funds that fill the void left by departing commercial coverage - the Joint Underwriting Association and the Windstorm Fund.

One covers wind-related risks exclusively, while the other provides insurance to homeowners when it isn't available on the commercial market.

But the AIA takes a dim view of many of the task force's recommendations, seeing little to attract commercial insurers back into this market. The continuing extreme weather renders property insurance in Florida, as well as the gulf states, more and more unattractive.

"Regrettably, many of the panel's final recommendations will actually work against Florida consumers and keep the insurance market in permanent paralysis," said Robert E. Vagley, president of the AIA.

The association sees an unacceptable degree of "cross-subsidization," whereby one class of business or business from another geographical area is used to compensate for money-losing business in Florida property coverage.

"These kind of cross-subsidization policies create a great disincentive for new insurers to enter the market," Mr. Vagley said last week in the hurricane's aftermath. He called for a "strong and competitive free market."

The Florida Insurance Department, following the exodus of insurance companies after 1992's Hurricane Andrew - a $16 billion disaster - imposed a moratorium on insurers' refusing to renew homeowner policies.

However, better information for projections will be available after law enforcement officials give claims adjusters clearance to begin estimating Opal damage.

"Authorities are keeping residents as well as insurance adjusters out of the Pensacola area, so nobody's been able to get in to look at the damage," said Bob Jones, media relations manager for Lincoln National Corp., which estimates it will lose at least $15 million from Opal.

Opal killed at least 17 people in four states after slamming into the Florida Panhandle on Wednesday with winds up to 144 mph. Its 15-foot storm surge caused most of an estimated $1.8 billion in damage to insured property along the Gulf of Mexico.


The initial damage estimates made Opal the third-costliest U.S. hurricane in terms of insured losses, according to the Insurance Information Institute in New York.

But the insured property damage is only one-tenth of the $17 billion in losses inflicted by Hurricane Andrew in August 1992. Hugo caused $4.2 billion in damage in 1989. Damage from those hurricanes cost Lincoln $39 million - $20 million for Andrew and $19 million for Hugo.

The Florida Windstorm fund, which is industry-backed, estimated its own losses at $250 million to $300 million, the Florida Insurance Council said. Losses that large would allow the windstorm association to draw up to $74.7 million from the state's 2-year-old catastrophe fund, the council said.

The tax-exempt trust fund, which was created to reimburse companies for a portion of their losses after a certain threshold is reached, is expected to have a balance of $890 million by year end. The money, which comes from premiums paid to the fund by insurance companies, could be leveraged to raise an estimated $5.2 billion, if needed.

Any withdrawal from the fund is significant, since it shrinks the money available for future storms. But an industry executive said money withdrawn by the windstorm association may not change the equation by much.

"If they take $75 million out of $5 billion and that's all they take - no, it's not significant," said vice president Sam Miller of the Florida Insurance Council. "If this is a trickle that turns into a flood - and I honestly don't think it is - that would be significant."