His remarks came during a speech before the Professional Insurance Agents of New York's Metropolitan Regional Awareness Program on Thursday in Brooklyn, N.Y.

Mr. Lee reflected on his company's recent experience with an initial public offering on the Nasdaq National Market in October. Tower operates through subsidiaries?Tower Insurance Company of New York, a property-casualty insurer, and Tower Risk Management Corp., an insurance service provider.

It is not affiliated with the TowerGroup research and consulting firm.

Mr. Lee said although the insurance industry has not been profitable, the Tower IPO drew an enthusiastic response, garnering more than $220 million market capitalization.

Despite this endorsement, he continued, the reality is that there is a conflict between public carriers and investors in performance expectation.

The investment community is looking for a return on equity of 15 percent, while the industry's ROE is averaging 9.7 percent, he said. In order to achieve such numbers, the industry will have to reach a combined ratio of 92.5 percent?something it is not in a position to achieve.

The industry will always have a tough time reaching this goal, and with the coming soft market, that goal may be impossible to reach, he noted. Insurers are intensively competitive, he said, and becoming more so in the current market. Carriers also find it difficult to manage their expense ratios, Mr. Lee added.

He said that chasing the investor's expected ROE can contribute to the insurance market cycle. As some insurers chase markets in a soft market, some fail and create hard-market conditions through diminished capacity; as underwriting improves, competition heats-up, and the cycle repeats.

However, he said, this cycle may see some mitigation as rating agencies scrutinize companies more closely, causing carriers to be more conservative in their decisions.

Added regulation of financial reports, creating demand for stricter reserving and replacement of surplus deficiency, will also dampen the volatility of the soft market. Questions over renewal of the Terrorism Risk Insurance Act are also having a sobering affect, he said.

For the future, Mr. Lee said, insurers need to maintain a healthy book and "get back to doing the hard work" of underwriting and reduce expense ratio. He said there must be greater reliance on technology and agents to help reduce duplication and increase work flow.

Agents, he declared, should be concerned about carrier profitability because it means maintaining stable and consistent markets for them.