EDITORIAL\Two years later . . .\Quake recovery continues. The new challenge is preparing for temblors\to come.

DESPITE some painful problems here and there, Los Angeles continues to make a remarkable comeback from the Jan. 17, 1994, Northridge Earthquake, the costliest natural disaster in U.S. history.

Today is the second anniversary of that $25 billion disaster, and much rebuilding has been completed or at least begun.

Still, repairs are far from finished at some locations - California State University, Northridge, is an example. And reconstruction hasn't even started at some of the San Fernando Valley's hard-hit points.

Meantime, many small businesses have closed or are struggling (even if they survived the temblor) because their customers moved away as people vacated nearby quake-damaged homes or offices.

Still, in the last two years, a great recovery has been achieved - in part, through a can-do attitude among residents and business owners, assisted by billions of dollars in government aid that flowed to the disaster area.

Given the progress so far, attention now is turning away from damage repair and toward damage prevention in future quakes.

The rationale for prevention is underscored by growing scientific evidence that the hazard of serious quakes is much greater than previously believed.

Spurred by such forecasts and the destruction from the Northridge and Loma Prieta earthquakes, the state has given new attention to the task of seismic retrofitting for state highway interchanges and bridges.

Also, it has become obvious that the designs of certain buildings can stand additional improvement. The failure rates of some parking structures and retail stores provided classic examples.

But attention also must be paid to costs, especially for retrofitting housing. For instance, L.A. officials are considering a seismic safety program that might force as many as 80,000 property owners to make mandatory structural changes at a total cost of many millions of dollars.

Unless reasonable financing is available, overly strict mandates might create devastating aftershocks for owners of thousands of residential, commercial and industrial structures.

Compromises will be necessary. In some instances where costly work is called for, it probably would be wise to delay mandatory compliance until the properties change hands or are improved.

Meanwhile, there continues to be a need for a comprehensive federal disaster-insurance program and, in the interim, a better insurance program on the state level.

No solution appears close to adoption on Capitol Hill, but Sacramento is making headway in organizing bare-bones quake insurance coverage through a new mechanism being arranged by state Insurance Commissioner Chuck Quackenbush.

The proposal calls for a privately financed, publicly run agency to be known as the California Earthquake Authority. Quackenbush still has to go back to the Legislature for final approval, but lawmakers gave him the OK last year to make tentative arrangements with financial markets to fund the plan.

While critics dislike some aspects of the plan, so far it seems like the most practical way to assure a supply of quake insurance for the state's homeowners.

Without the such a plan, quake coverage probably would dry up entirely.