Explain why an insurance company has no problem in selling life
insurance to individuals but is reluctant to issue policies insuring
against flood damage to residents of coastal areas.  Why don?t the
insurance companies simply charge coastal residents a premium that
reflects the actuarial probability of damage from hurricanes and other
storms?

Its because hurricanes and flooding are to difficult to assess, and
when there is damage, it is total and pervasive (at least in an area).

With health insurance, you can have millions of data points (i.e.
health records of millions can be used to make mortality tables.  With
Hurricanes, there arent that many data points.  And onebig one can
sink an insurance company.  It is probably tough to get reinsurance on
flood insurance as well.

Ok, thank you for elaborating, sometimes risk assessments are based on
probability, that is what I was looking for...thank you

Flood insurance is not issued by insurance companies.  It is issued by
the US government.  Insurance agents can sell this insurance, but the
US government is the one holding the risk not the insurance company.

I've never heard before that the US Gov holds the risk in flood
insurance... could be true, I've just never heard it in all my
insurance dealings.

One thing I do know is that many states don't allow insurance
companies to charge more in 1 region than in another... this leads to
under pricing in coastal (flood) regions and overpricing in safe
areas.  This disparity makes it very difficult for a company to set a
price that is reasonable and/or profitable, many would rather not deal
with the hassel.

Google is your friend

http://www.fema.gov/news/newsrelease.fema?id=14729

Basically because people die one by one, but they get flooded all at
the same time.  The risks of flood are *correlated* one with another. 
This matters because insurance is all about the principle of risk
pooling; the idea that as you add more and more policies, the less
variability there is.  If you have 100,000 life policies and the
mortality rate is 10%, then you can be pretty sure that you're paying
out on 10,000 policies every year.  If you have 100,000 flood policies
and the probability of a flood is 10%, then you will most likely have
0 claims most of the time and 100,000 claims once every ten years,
which will probably drive you into bankruptcy.

So what I'm saying is that 100,000 life policies equals 100,000
independent risks, but 100,000 flood policies is just one big risk.