The industry's combined ratio should see some improvement. The 2005 ratio is estimated to come in at 101.8 percent, after hitting 98.3 percent in 2004. The 2006 projection stands at 97.7 percent.

However, said Mr. Hartwig, return on equity remains low compared to Fortune 500 company returns. The 2004 results of 98.3 percent produced 10.5 percent ROE, while the Fortune 500 returns hover around 13-to-14 percent.

"Considering the tremendous risk assumed by investors who back major insurance and reinsurance companies, these returns are woefully inadequate," Mr. Hartwig noted. Insurers will need to generate greater returns from underwriting if they are to achieve improved returns.

His report said the industry will remained burdened with catastrophe concerns through 2006, and the inability to obtain federal restrictions on civil litigation means additional legal costs. Industrial asbestos injury claims, he said, are also a major concern, with no solution in sight.

Terrorism insurers, though covered by a federal backstop plan through 2007, face increased trigger points for supports, and that could translate into losses for the industry equal to or greater than 9/11, he wrote.

Finally, Mr. Hartwig noted, the industry should see fewer "screaming headlines" over investigations concerning improper broker compensation.

However, he noted the industry may have to deal with its most high-profile prosecutor becoming governor of New York if the candidacy of New York Attorney General Eliot Spitzer is successful.