Mr. Heck also voiced criticism over underwriters' hesitancy to provide coverage in the New York area after 9/11.

The executive advised that insurers must provide a stable marketplace or risk losing credibility with clients.

Mr. Heck said criticism that the industry is increasing rates for no reason other than to take advantage of the situation post 9/11 is without merit.

His own New York-based company, Mr. Heck said, has experienced staggering reinsurance costs, and those costs, plus stricter underwriting standards, must be borne by insureds.

However, he cautioned, companies need to do a better job of getting their financial house in order.

"Let us not fall back to those dismal days of unbridled price competition and the complete sacrifice of pricing integrity," he said.

"As an industry, we must provide stable, predictable markets and make available insurance coverage that protects the public. That can only be accomplished through a return to disciplined and solid underwriting practices."

He noted other insurance company heads have voiced the opinion that years of a soft market and other economic conditions have lead to the current hard market, which could last for a few years.

The future of the industry "is far from bleak," but there are a number of issues "undermining the financial strength of our industry," he noted

Mr. Heck termed it "shocking" that a large segment, as much as 90 percent, of the carrier population is rated less than superior by rating agencies. He said there are a number of reasons for this circumstance, "ranging from insufficient loss reserves, asbestos and environmental liabilities, and staggering jury awards to the inadequate pricing of our products."

"For the long run, as an industry, it is important that we not lose credibility with the insuring public," Mr. Heck continued. "Insureds are skeptical about whether they are receiving the broadest coverage at the lowest premium."

He said the previous soft market helped create this attitude.

On the terrorism issue, he was critical of admitted companies for pulling out of markets in New York state after 9/11 because they could not exclude terrorism.

While he understood their economic circumstances, he added, "as an industry we also had a duty to find a way to provide insurance coverage for terrorism losses to commercial risks to protect insureds from financial ruin in the event of another terrorism attack."

He said the industry did not explore enough solutions similar to programs set up in other countries that have developed terror risk programs.

On a federal level, while the U.S. government may have been reluctant to create another bureaucracy, it does have plenty of experience with catastrophic insurance programs, such as the national flood program, that have proven to be highly successful.

While the current federal backstop program is necessary, he said it is flawed.

One reason is that the retention rates for major insurers are too high, Mr. Heck said. He said in a terror event equal to the World Trade Center major insurers would be subject to the same degree of loss. Regional companies would fare better because they have secured some reinsurance.

Another problem, he added, is that the program does not cover nuclear, biological or chemical events and domestic terrorism. Many reinsurers, he said, are not offering coverage for domestic terrorism to primary companies.

Other problems he observed are conflicts over jurisdiction between state regulators and the federal law, creating confusion in a number of states. He suggested that urban areas may have to bear the burden of pricing because suburban and rural clients can opt-out of the plan.

The "most serious flaw" of the terrorism backstop, Mr. Heck said, is that the legislation has a three-year life span, which is not long enough for insurers to create sufficient reserves or for terrorism to disappear, owing to "the uncertainty of terrorism exposure in the future."