NEW YORK (CNN/Money) - For those that may have been lulled into a false sense of security, Hurricane Wilma is serving as a dramatic reminder that hurricane season is far from over.

Word that the deadly Category 5 storm churning in the Atlantic Ocean is headed towards Florida put pressure on some insurance stocks early in the session, as investors wondered how the insurance industry will withstand another devastating blow from Mother Nature.

"We are already at about $50 billion of insured losses from catastrophes in this country so far and that could be as high as $70 billion, depending on what Katrina does," said Robert Hartwig, chief economist at the Insurance Information Institute. "Hurricane Wilma is a situation that is going to exacerbate what was already problematic for the insurance industry."

But shares have since bounced back as investors took heart in the industry's strong capital position and speculated that another hurricane could lift insurance rates. Allstate (Research), which has the largest market share in Florida with 10.5 percent of the market, shook off its losses and recently gained 0.07 percent while St. Paul Travelers (Research), with a 3.8 percent market share, climbed 1.8 percent.

With over $400 billion in capital at the end of 2004 and with another $32 billion in earnings in the first half of the year, market watchers say the insurance industry is capable of paying out claims from another major hurricane without losing its financial strength.

Florida is better-prepared than states in the Gulf Coast region hit by Hurricane Katrina to meet the needs of its citizens and the insurance companies with exposure to that market.

"The Florida Hurricane Catastrophe Fund should ease the burden on insurers, assuming Wilma causes significant damage in Florida," said Merrill Lynch analyst Jay Cohen in a research note. "The Fund should make Wilma a far less dramatic event than Katrina, assuming it makes landfall as a strong storm."

The Florida Hurricane Catastrophe Fund, a reinsurance-type entity, was created in the wake of Hurricane Andrew in 1992, which caused more than $20 billion in damage and resulted in a number of insolvencies within the insurance industry.

To prevent insurers from exiting the market en masse, the state of Florida passed a number of mitigation initiatives. In addition to the catastrophe fund, Florida raised premiums, increased deductibles to between 1 and 5 percent of the total value of a policyholder's home, and created Citizens Property Insurance Corp. -- a state-regulated association that provides property insurance when it is unavailable from the regular market.

Analysts said those measures helped curb insurer losses following the barrage of hurricanes last year and will likely help insurers if Hurricane Wilma turns out to be a major disaster.

The Insurance Information Institute's Hartwig said the Catastrophe Fund will be tapped if losses from Hurricane Wilma exceed $4.5 billion and other potential losses will be absorbed by the insurer of last resort, Citizens, which has taken on increased market share as more companies opt out of the Florida market.

So where does that leave insurers? Potentially at the receiving end of some pretty hefty rate increases.

Peter Streit, insurance analyst at Williams Capital Group, said he expects rate increases of 20 percent to 40 percent as less capital becomes available for the reinsurers who take on the risk from the insurance industry. With primary insurers poised to pay more, they will likely transfer the extra costs to consumers.

"To the extent that another event reduces capital, the likelihood of pricing increases is that much greater," he said.

He added investors may want to consider the recent events as a buying opportunity. As stocks were hit, valuations have decreased. But insurance companies have generated above average rates of return and there's a strong chance the industry will see higher rates, pushing returns even higher.

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Could the Florida Catastrophe Fund serve as a model for a national fund? Find out here.

Insurers see opportunity in the Florida market. Find out more here.

An earlier version of this story misstated what types of insurance the rate increases would apply to.