Almost three months after Hurricane Katrina damaged tens of thousands of homes, insurance companies worry about safety, regulations and future risk. Existing homeowners argue about payouts, and would-be buyers struggle to find any insurance at all.

"We were ready to sign a contract on a house, but we can't get insurance," said Steve, whose company is moving him to New Orleans and who asked Reuters not to use his second name. "I'm baffled why the real estate companies still show houses."

"There are only a few companies that are writing policies right now, and everything is running slowly," realtor Muffin Labourisse, whose company is still showing and selling houses, said of the city's post-hurricane real estate reality.

But it also punctured flood protection levees and left vast areas under up to 10 feet (3 metres) of water. Hundreds of thousands of people left town and many have not returned, either because their jobs disappeared, or because they have nowhere to live.

For insurers that means huge uncertainty. Allstate Corp., for example, said last month it would cut its exposure to property in hurricane-prone states because it couldn't "price insurance properly."

"Some (insurance) companies are only writing for current customers if they are moving, others are not writing at all. There are so many areas that are so badly damaged that nobody wants to insure there, because there is no guarantee what is going to happen next hurricane season, or next time there is a big storm," Labourisse said.

The Insurance Information Institute, a leading U.S. insurance industry group, expects some 1.6 million claims worth a total of $40 billion from Katrina.

That's almost twice the $21 billion (in today's dollars) caused by Hurricane Andrew more than a decade ago and does not include several billion dollars for damaged offshore energy facilities or $25 billion in federally funded flood insurance, said Robert Hartwig, the institute's chief economist.

"We know that the levees can be breached, and we know that the level of fire and police protection in these communities is not what it once used to be. All of that factors into the riskiness associated with insuring a home."

John Marlow, of the American Insurance Association in Austin, Texas, said he was worried legislators would react to the storm by introducing rules that could make Louisiana a more difficult place to operate in.

"It's been a slowly improving scenario, providing home owners with greater competition and better rates," he said. "But they need to stay on that track rather than revert back to an overregulated and burdensome system that drove insurers away from the state 10 years ago."

"That's going to go a long way toward spurring redevelopment and building properties that will withstand similar events in the future to a greater degree," he said of the codes, which aim to ensure that homes in hurricane-prone areas in the south of the state are built to withstand winds of 130 to 150 miles (210 km to 245 km) an hour.

"That's a good move and sends a good message to the insurance community that when things are rebuilt and redeveloped they will be safer and will be able to withstand storms in the future."

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