Mr. Porrino was among five executives discussing the challenges facing financial services firms next year during the professional services firm's Financial Services Outlook 2004 briefing.

Speaking on the insurance issues, Mr. Porrino said commercial property has seen dramatic reductions over 2003 and that there are suggestions some premium pricing in this line would actually fall into negative numbers.

"It will be interesting to see where the Jan. 1 renewals go," he said.

Other lines, he said, are showing robust improvements, and this is the first time that insurers' pricing has kept up with claims.

Panelists said carriers have managed to fix profitability in some lines, such as homeowners insurance, while substantial problems remain in other lines, such as medical malpractice insurance. The fixes have included better underwriting and either pulling out of poor performing markets or placing exclusions on policies that cover extraordinarily expensive, long-tail risks.

On the reinsurance front, Mr. Porrino said, reinsurance carriers are either "unable or unwilling to pay" for claims that in the past would have been covered without question. These carriers are no longer willing to cover claims they feel they are not liable for out of an obligation to a long-term relationship. Instead, they have become more willing to litigate.

"There has been a dramatic relationship change," said Mr. Porrino.

On the merger's and acquisition front, while it might make sense for some companies to look at a merger, there remain severe balance sheet issues that will keep the M&A climate quiet for "a couple of years," Mr. Porrino said. He called the merger of St. Paul Insurance Group and Travelers "a unique transaction." Carriers will continue to sell renewal rights to other carries as a way to improve their books.

In answer to a question concerning the effects of the termination of the Terrorism Risk Insurance Act, which is scheduled to sunset in 2005, Mr. Porrino said the p-c commercial industry has not demonstrated a need for the coverage. He said he did not believe premium prices would be affected by the act's expiration.

Discussing corporate governance, generally, Robert W. Stein, chairman, global financial services, financial services practice, said financial services businesses need to toughen their oversight or face more government regulation of their industry.