He added that S&P is also looking for other things, such as clear vision of the company's overall risk tolerance, the "so-called risk profile and better than average" risk control processes.

"We would expect a strong ERM company to have control processes for some of their risk that will actually give them competitive advantage in an adverse situation," he said.

Such a company, Mr. Ingram explained, "either would not be exposed to as many of the negative events that occur in its industry, or when those events happen, it would "not suffer as large a loss because they have some preparation for that."

What trips up many companies is the ability to do strategic risk management, or overall risk-reward tradeoff. This is something that in the insurance industry "is only practiced by a small fraction," Mr. Ingram said.

Insurers that fall into the "excellent" category are those "that have been strong and have been operating with a strong basis for a long period of time and have well-developed platforms that they are continuing to refine," he noted.

Mr. Ingram explained that as of Oct. 31 S&P totaled its opinions and found that "the adequate category very much dominated." Three percent fell in the "weak" category, 5 percent in the "excellent" category and 8 percent in the "strong" category, leaving 84 percent in the "adequate" category.

He acknowledged that the "massive" adequate category is not uniform, and forms a continuum. At one end are the weaker companies, "that just barely have control structures in place," while at the other end of the spectrum are companies "in the middle of major development projects enhancing their ERM capabilities."

Examples of "excellent" ERM companies include Genworth, Manulife, Partner Re, Renaissance Re, Travelers and USAA, he said.

Those in the "strong" category include ACE, Aetna, Berkshire Hathaway, Chubb, Endurance, Hartford, MetLife, Nationwide, Platinum, Progressive and Sun Life.

On the positive side of the "adequate" list are those companies that "we think in one to three years will be moving into the 'strong' category because they have most of what it takes to be strong and have shared with us specific plans to develop the pieces they don't have," he said. These include Allstate, Ameriprise, Axis Capital, New York Life, Principal, Prudential and XL Capital.

Mr. Ingram said that some of the companies listed as adequate are silo-based, "and therefore missing the advantages that ERM has to offer."

He said that one company, Manulife, had a strong ERM program that was instrumental in moving the company to a "triple-A" rating last year.

ERM is an evolutionary process, Mr. Ingram noted, and as companies continue to enhance their ERM programs, S&P enhances its ERM rating processes.

"This two-year journey we've been on was started with publishing broad criteria," he said. Six months later S&P published an enhanced document with more specific details. "We published our findings of ERM, and we keep explaining and improving our process as it moves along," Mr. Ingram said.