Needham, Mass. (May 21, 2004) -- Add U.S. insurers to the list of companies Sarbanes-Oxley is hitting in the wallet – on average, individual insurance firms will invest from $250,000 to $750,000 over the next year to ensure compliance with the SOX financial accounting framework, according to a TowerGroup research study.
Even though the majority of insurance companies already maintain a "rigorous" corporate governance model, "Insurers realize that the [Sarbanes-Oxley] Act serves as a catalyst for a long-term financial systems architecture strategy and [for] process improvements in risk management," states the report, "Sarbanes-Oxley and Insurance: Requirements, Hype, and Opportunity," by senior analyst Cindy Saccocia.
SOX-related activities that insurers will pursue include enterprise technology investments in financial reporting, content management and business intelligence, in keeping with SOX requirements for documentation and validation of reported data, according to the study. Other areas of investment may include security, data integration and replacement of legacy systems, notes the report.
"Sarbanes-Oxley has exposed weaknesses in the [insurance industry] infrastructure, and compliance with the act can be an opportunity for insurers to realize the benefits of real-time reporting as a step toward enterprise risk management," writes Saccocia. Investment in SOX-related activities is forecast to peak by 2006, with some individual insurers expected to invest more than $1 million that year to ensure compliance.
-- Richard McCausland
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