There are 4 different ways that a caterpillar can cause Urticaria:

Caterpillars of Doratifera vulnerans, LIMACODIDAE
with stinging hairs everted.

1. caterpillars from the family LIMACODIDAE have hairs that sting, rather like nettle hairs. The hairs are sharp and hollow and contain a poison liquid which is injected into the skin when they are touched, thus causing pain and inflamation.
   
   Caterpillars of Chelepteryx collesi, ANTHELIDAE
   with stiff sharp barbed brittle hairs.

2. caterpillars of some species such as Chelepteryx collesi have hairs that are stiff, sharp, barbed, and brittle. They can readily penetrate the skin then break off. So the result of touching one of these caterpillars is like having a bunch of splinters. These are especially dangerous if they lodge in the eye.
   
   Caterpillars of Euproctis edwardsii, LYMANTRIINAE
   with hairs.

3. other caterpillars of the four families and subfamilies ANTHELIDAE, ARCTIINAE, LYMANTRIINAE, and THAUMETOPOEINAE are hairy, and some people are just allegic to the touch of hairs from some of these caterpillars. These people come out in a rash if they touch a caterpillar to which they are sensitive
   
   Caterpillars of Ochrogaster lunifer, THAUMETOPOEINAE
   with infected hairs.

4. some caterpillars of these same four families and subfamilies ANTHELIDAE, ARCTIINAE, LYMANTRIINAE, and THAUMETOPOEINAE have hairs that are sharp enough to pierce the skin, but the hairs carry bacteria and other micro-organisms, so these micro-organisms are injected into the skin in these cases. Depending on the organism involved, this can result in infections of many different sorts. For example, mares carrying foals have been thought to have spontaneous abortions if infected by microorganisms on the hairs from larvae of Ochrogaster lunifer.

People can get Urticaria from more than one of these causes: maybe the hairs cause an allegic reaction and also cause infection, or any other combination of the four causes.

So never touch a hairy caterpillar. If you want to move a caterpillar : then put a bit of paper or a leaf in front of it, and then tickle the rear of the caterpillar gently, with a twig or something, until the caterpillar walks onto the paper or leaf, then take that with the caterpillar on it, and put it somewhere out of trouble.

The problem is not confined to the live caterpillars. As the caterpillars grow: they moult and shed their old (hairy) skin to grow a new bigger one. The old skins decompose and the hairs can blow about and cause Urticaria if they land on someone's skin.

Furthemore, when these hairy caterpillars pupate in a cocoon, they usually attach their hairs to the cocoon, so touching the cocoon can also cause Urticaria.

In north and south America, caterpillars of species in the family MEGALOPYGIDAE) also have hairs and toxins which when in contact with human skin can cause severe pain and hemorrhagic eruption. Puss Caterpillars or Flannel Moths are common in south eastern U.S.,and in the southwestern U.S. there is a related species in the same family called the Mesquite Stinger. Christina had personal experience with this Mesquite caterpillar. Just brushing against the spines produces intense pain as bad as any wasp sting, and lasting at least half an hour.