On the surface, the crisis centers on a state law that requires insurers providing homeowner policies to also provide earthquake insurance, but the linkage is also making it difficult for homeowners to insure against fires.

Here's how the crisis developed and what solutions are underway in Sacramento:

"Prior to 1987, the United States never experienced a natural disaster with insured losses greater that $1 billion," noted the Natural Disaster Coalition last winter. "Since that time there have been eight such events."

Some of these disasters, in fact, far exceeded the $1 billion mark. Hurricane Andrew, which hit Florida in 1992, cost insurers more than $15 billion. Last year's Northridge earthquake in Southern California cost $12 billion.

Covering such disasters is not merely part of the cost of doing business. "In the event of another large catastrophe," predicted Frank Nutter, a spokesman for the insurance industry, "10 insurance companies will go under."

Nutter, president of the Reinsurance Association of America, issued the warning at the end of a three-day conference in San Francisco last February.

By coincidence, the conference was held only two weeks after a temblor of 7.2 on the Richter Scale struck Kobe, Japan.

The warning had special significance for West Marin. In the 1906 San Francisco earthquake (8.3 on the Richter Scale), the greatest land movement was in Olema - more than 15 feet in places.

Although that temblor predated earthquake insurance, other records indicate it was the culmination of 71 years of strong seismic activity time for California, David Schwartz of the US Geological Survey told the conference.

During those 71 years, said Schwartz, more than 16 earthquakes exceeded 6.0 on the Richter Scale.

Geologically, a period of relative calm followed the 1906 quake, he added, but in the last 15 years, California has been in another cycle of 6.0 and greater earthquakes.

The shaking, geologists say, will likely be more than twice as vigorous as it was during the 1989 Loma Prieta earthquake and, consequently, far more destructive.

The Rogers Creek Fault has not moved significantly in more than 150 years, Schwartz noted.

Marin county building inspector Ed Henry said a quake along the San Andreas fault would shake West Marin the hardest. "West Marin would get the strongest ground acceleration, which has a tendency to shear [building] foundations from walls," Henry said.

In order to do this, insurers claimed, the burden of cost and preparedness must be shifted to homeowners and local government.

Eugene Lecomte of the nonprofit Insurance Institute for Property Loss Reduction said the insurance industry is asking nothing less than a "cultural redefinition" in the way Americans regard insurance.

Many Americans believe they are entitled to build on any site they can afford - even in a floodplain or a forest - and still get insurance, Lecomte said.

Zoning needs to be overhauled to take natural disasters into consideration, he and Nutter said.

Americans regard insurance as an entitlement rather than a privilege, Lecomte said, adding that the public has a misconception that insurers have a huge surplus set aside to pay claims when a catastrophe strikes.

The notion of huge surpluses is far from the case, Nutter added. Although claiming that tax laws discourage insurers from setting aside surpluses large enough to cover a disaster the size of Hurricane Andrew, he acknowledged that almost 40 percent of insurance premiums are reinvested.

Garamendi's successor, Commissioner Chuck Quackenbush, is now trying to solve the problem. This year, he got the Legislature to create a California Earthquake Authority which will provide no-frills coverage for earthquake damage and spread liability more widely.

However, faced with concerns from several groups, the Legislature modified Quackenbush's plan. In addition, further legislative action will be needed to implement even the modified plan, which Gov. Wilson signed into law Oct. 16.

The scheme would create an insurance pool financed by insurance companies, reinsurers (which insure insurance companies), and investors. Key to creation of the pool would be getting the Internal Revenue Service to agree that the pool can be tax-exempt.

If the Legislature next year implements the Quackenbush plan in its now-modified form, here is how it would work:

¥ The first $1 billion in claims would be financed by a non-refundable cash contribution from insurers based on their share of the market.

¥ The next $3 billion would be financed by commitments from insurers based on their market share.

¥ The next $2 billion would be covered by reinsurers.

¥ The next $1.5 billion would be covered with capital raised from investors.

¥ The next $2 billion would be financed by commitments from insurers based on market share.

The Consumers Union predicted this scheme would prompt insurers to write 30 percent more homeowners policies. The pool, however, would be able to cover only $8.5 billion in claims, and the Consumers Union warned that if claims in a future earthquake were to exceed that total, there would be tremendous pressure on the Legislature to make up the difference at taxpayer expense.