Standard & Poor’s Ratings Services reports that insurance industry executives at its latest industry conference said they are hoping for a return to normalcy after a tough year, which saw them grapple with the investigations by New York State Attorney General Eliot Spitzer and spend heavily to meet tougher disclosure and corporate-governance requirements under the Sarbanes-Oxley Act.

S&P managing director Steve Dreyer told attendees a higher number of insurers are being assigned a positive outlook this year and downgrades are declining as insurers renew their focus on traditional concerns of margin improvement and underwriting profitability. “After an intense year that put the insurance industry in a harsh spotlight, we are expecting a moderating trend going forward,” Dreyer said.

“Out of these investigations come a better industry and better companies,” said chief executive officer of CAN Financial Corp. Steve Lilenthal. Along with the other members of the CEO panel speaking at the conference, he noted that the Spitzer investigations would result in greater transparency and confidence by the public in the industry, while keeping the industry from taking some of its traditional practices for granted.

CEO of Jefferson-Pilot Corp. Dennis Glass said the investigations will force the industry to put more focus on the interests of its policyholders. “We’ve asked what happens to our companies rather than what happens to our customers,” he said. The investigations, he feels, will ultimately cause the industry to refocus more on them.

The executives also felt they could see a return to more normal activities now that their companies had finished, for the first time, complying with the rigorous requirements of the Sarbanes-Oxley Act. All three executives described those filing requirements as expensive (especially for smaller companies), cumbersome, and time-consuming. None of the three expect the law to be repealed, but all hope for modifications that would render compliance less burdensome, it reported.

Even so, the future of compliance with the law should be easier, said Glass. “The front-end costs will go down over time.”

The executives also note the increasing importance of enterprise risk management to their businesses. Some felt the rising importance of enterprise-wide risk management could be difficult to implement, as the definition of risk has spread beyond the traditional underwriting and investment to include operational risk. But they appeared to be moving toward the conclusion that, as chief risk officers broaden their portfolios, their businesses will be better off.

And that improvement will come as risk officers are given more power to implement changes in a company rather than being mere collectors of information. “Best practices are having these people move from being data collectors to officers with the power to act,” said Dreyer.

The biggest worries the insurers saw facing them this year concern legislative issues. One was tort reform in the U.S. The other big legislative worry was the availability of terrorism coverage and the apparent willingness of some to let the government reinsurance law lapse at the end of 2005.