The Sarbanes-Oxley Act can serve as a catalyst for improvements to financial management in areas such as risk and capital management that can further enhance operational discipline, corporate governance, and enterprise risk management, according to new research from TowerGroup.

"The globalization of insurance and the current complex regulatory environment necessitate a systematic, integrated approach to risk management," said Cindy Saccocia, senior analyst in Tower's insurance practice and author of the research. "Sarbanes-Oxley regulation drives a tight alignment between top-office and daily internal control activities. It calls for improvements to financial management in areas such as risk and capital management that can enhance operational discipline and corporate governance across insurers' total operations."

Insurers are hastening to comply with the act. Between 2004 and 2005, Tower predicts that individual firms will invest an average of $250,000 to $750,000 each on Sarbanes-Oxley related activities. These investments will peak by 2006, with some individual insurers expected to invest over $1 million to achieve compliance.