HENDERSON, Nev.–Insurance executives at a conference here saidthat their sector faces uncharted waters next year dealing withdeclining rates, an economic downturn, tight credit markets andefforts to increase regulation of their industry.

George A Steadman III, chairman of the Council of InsuranceAgents & Brokers, addressing attendees at the CIAB's annualInsurance Leadership Forum (ILF) held here said one thing to comeout of the current financial crisis will be more attention to theregulation of insurance.

Mr. Steadman, president and chief operating officer of theinsurance brokerage firm Rutherfoord in Roanoke, Va., said theincreased focus on regulation will come as legislators andregulators seek ways to ensure the financial services industry doesnot fall into a subprime market crisis again.

The insurance industry, he noted, was on the verge of gettingsurplus lines reform legislation through the Senate, but thesubprime market crisis pushed that issue to the back burnermomentarily.

However, Mr. Steadman warned no matter who wins the upcomingpresidential election, attention will once again come to insuranceregulation. It will be up to members to be vigilant and support theCIAB's efforts to look out for their self interest.

John J. Degnan, vice chairman and chief operating officer ofWarren, N.J.-based Chubb, noted that the financial servicesindustry has witnessed a series of unprecedented events that haverocked it to its core, wreaking financial havoc on much of thenation. Among these events was the nationalization of AmericanInternational Group. The government took a 79.9 percent stake inAIG as collateral for an $85 billion loan.

Mr. Degnan said the fallout from these shake-ups in the economyare too early to be assessed for the long term, but he appeared tobe admonishing insurers who appear to be taking advantage of AIG'ssituation, saying they “should not gloat over the victims.”

“When one of our largest and most prestigious insurancecompanies needs to be bailed out by the government, we all suffer aloss of confidence by our customers,” observed Mr. Degnan. “Intheir mind, they wonder who will be next.”

He said the industry needs to assure customers that insurers arestrong and stable and will be there to pay claims when called on todo so.

“If there is one lesson to be learned here for carriers, it isthat our desire to earn a superior return for our shareholders mustnever overpower our responsibility to preserve our financialstability so the wherewithal to fulfill our financialresponsibility to our policyholders will never be jeopardized,” hesaid.

In an interview with National Underwriter, Markham R. McKnight,president of BancorpSouth Insurance Services Inc. and the incomingchairman of the CIAB, said what is particularly alarming about thecurrent crisis is the fast pace of change that is taking place.

“My answer in two-and-a-half hours from now could be differentfrom two weeks ago,” he remarked, adding that financial crisis has“absorbed all the oxygen” that could have been used to push throughneeded industry reforms such as gaining greater marketefficiency.

However, for the coming year, one issue that will grab theattention of the industry will be preventing onerous regulationfrom becoming a reality. More regulation is coming, he said, and asthe country works through this financial crisis one concern is thatsome will want insurers to use their loss reserves to cover lossesfrom bad assets and erode the carriers' ability to pay claims.

“We need good regulations,” said Mr. McKnight. “We want tointeract in such a way that we protect the consumer and surplus.But we do not want to be so overly regulated that it throws thecost burden back on us.”

More important, he said, will be reinforcing client confidencein the industry by reassuring them of the soundness of the industryand understanding what is happening before it become news.

“We do not know where the tail is going to whip on this thing,”Mr. McKnight pointed out.

He said another concern for brokers is talk among someregulators that value-added services should be consideredrebates.

Rebates on premiums are illegal, said Mr. McKnight, but some areconfusing the nature of services with rebating premiums. He saidthe agenda may be being pushed by those who cannot provide servicesto customers and are looking for a way to level the playing fieldover pure price competition.