Weather threatens a real risky business.

• Position: Insurance business in North Carolina - Industry Overview

Insurers probably didn't need a major disaster to convince them coastal property isn't a good risk. In case they were wavering, Hurricane Fran blew away any second thoughts.

Even before the storm devastated Eastern North Carolina in September - and rocked the state's insurance industry to the tune of $1.3 billion in claims - Nationwide Insurance Co. had decided to pull up stakes from the highest-risk coastal areas all along the Eastern seaboard. But the Ohio-based company hadn't said anything publicly.

A month after the hurricane, Nationwide finally admitted what other insurance companies were concluding. "We can't afford to keep growing on the coast as rapidly as we have been," said Jim Merhar, Nationwide's top North Carolina executive.

The costliest storm ever to hit the state was the biggest event in a year that saw the insurance industry focus more tightly on minimizing its exposure. While many property and casualty insurers stopped writing new coastal policies, life and health companies shed lines that didn't relate to their core business and expanded in the areas they know best.

Fran highlighted a big decision for the property and casualty industry: whether to do business in hurricane-sensitive areas, particularly the fragile Outer Banks. In years past, insurers felt they could make money there because they charged higher premiums and hadn't seen a major storm in a long time. They also wanted to cash in on the building boom in coastal resort areas.

Nationwide was one of the big participants. The number of new policies it issued on the coast was growing at twice the rate of its statewide average. But it didn't want its other Tar Heel business to have to absorb the costs associated with coastal-area claims. So last summer it stopped writing new business in eight Tar Heel coastal counties. Allstate Insurance Co. did the same: In April, it halted new business in 18 counties on the coast.

The withdrawals prompted Insurance Commissioner Jim Long to work on changing state law to encourage insurers to do business on the coast. After Fran, Long said he would ask the General Assembly to exempt companies with a high proportion of coastal business from paying extra disaster charges to the two state-mandated pools that cover high-risk properties.

While Fran was unexpected, other insurance-industry events went like clockwork. Auto insurers proposed a 6% rate hike, only to see Long turn the request on its head, as he does nearly every year, and...