Insurers' CFOs worry about regulation, interest rates in '07.

Even before the Democrats took control of Congress, life insurers clearly were worried about a tighter regulatory environment, according to a study by Tillinghast: More than three out of four chief financial officers of life insurance companies polled in August and September said regulations were their biggest concern for the coming year.

The highest proportion of CFOs, 77%, cited "the growing level and complexity of regulations" as their biggest worry for the market and for the economic environment in 2007. Interest rates were the top concern of the second-highest proportion of CFOs (70%). Concerns about market consolidation (37%) and the equity market (37%), by comparison, lagged far behind.

Specifically, 40% of life company CFOs cited tougher regulatory or rating agency scrutiny of their risk-management practices. By comparison, only 14% of CFOs cited that as a major issue when last polled in 2004. The top concern of the most CFOs was compliance with the Sarbanes-Oxley Act, at 47%, but that was down from the 50% that cited it as a top concern two years earlier.

More than half of the CFOs, 55%, said they would enhance their risk-management practices in response to concerns about possible regulatory, tax, or legislative issues.

Some life insurers also were predicting heavy merger activity among the largest U.S. life companies. Twenty-three percent of those surveyed said they expected the market share of the top 10 life insurers to expand to more than 60% by the end of 2010.