Sarbanes-Oxley adds uncertainty to European view of U.S. markets. (Briefing: Highlights from BestWeek).

When it comes to the impact tighter U.S. corporate-governance rules will have on foreign insurers doing business in the United States, insurance industry observers say one thing is certain--what U.S. regulators do might change the way foreign companies govern themselves, both at home and in the United States.

Markus Diethelm, chief legal officer and head of public affairs for Swiss Reinsurance Co., said many people are talking about the Sarbanes-Oxley Act as the right solution to corporate-governance problems. "But whether U.S. role models can be imported into the European environment, and whether the proven crony capitalism among family run European companies is a better model to safeguard against corporate failures, is not clear," Diethelm said.

Comparing Sarbanes-Oxley and U.S. regulation of corporate governance with that of Europe is comparing a rule-based method with a technical approach, he said. The U.S. rule-based approach has its potential flaws. "If you have a situation where every member of a board's audit committee comes into a meeting with a lawyer, and the lawyer tells them what to do or say on every issue, it makes a mockery of that audit committee's talent and brain power," he said.

But Diethelm sees the Europeans as somewhat ambivalent about the U.S. approach. "Many European companies not listed on the New York Stock Exchange, such as Swiss Re, and many others who claim they will never list on the New York Exchange if things don't change, nonetheless may adapt certain features of Sarbanes-Oxley simply because the rules in Europe are far more limited than in the United States," he said. "Among European regulators, government issues have really been delegated, to a large part, to corporations.

"Over the past decade, everyone considered applying U.S. standards--the fail-safe approach--to governance. Since then we've learned that you cannot legislate ethics. There are crooks, so maybe the punishments should be increased, along the lines of kill one and scare a thousand."