Regulatory probes of the insurance sector are far from over, according to a leading insurance economist.

But Dr. Robert Hartwig, insurance economist at New York-based Insurance Information Institute, predicted Bermuda?s insurance sector will survive any fall-out from the high-profile investigations, despite some questionable business dealings allegedly involving some Bermudian companies.

Speaking with from New York yesterday, Dr. Hartwig said the key thing the Island?s insurance sector must do is maintain a good track record of transparent dealings, full disclosure and adherence with accounting laws and guidelines.

?The challenge for Bermuda is going to be to deflect any accusations that it is a haven for any companies looking to benefit from lax regulation and looking to be very opaque with respect to their financials,? Dr. Hartwig said.

The Island?s reputation as a leading insurance sector has come under scrutiny since regulators in a wide industry probe turned their attention to commercial insurance giant AIG?s dealings with offshore companies it secretly controlled.

Regulators at the Bermuda Monetary Authority (BMA) said they are conducting their own probe into the AIG matter, after New York Attorney General Eliot Spitzer, the US Securities and Exchange Commission (SEC) and the US Department of Justice turned their attention to possible abuses by the commercial insurance giant. At least one Bermuda AIG executive was fired for refusing to cooperate with investigators, and four staff who worked for him quit in the wake of his being let go.

In addition to its own investigation, Bermuda has also said it will tighten laws on how certain reinsurance deals are reported.

In the US investigation, questions were raised about numerous offshore insurers that AIG appeared to have significant ties to earlier in the year, including Barbadian Union Excess and Bermuda-based Richmond Insurance ? companies AIG later admitted to controlling.

The net effect of AIG admitting control of entities is that it now has to consolidate some of those numbers onto its books, thereby reducing its net worth by an estimated $1.2 billion.

A widespread probe of the insurance sector, led by Mr. Spitzer, first focused on controversial kickback payments from insurers to brokers who placed business for them, as well as allegations of illegal bid rigging.

Since then, regulators have turned their focus to how insurance and reinsurance are accounted for, including questions over possible misuse of non-traditional insurance products like finite risk.

The scrutiny of finite risk ? a loss mitigation product that was largely developed by Bermuda players ? has led to concerns that companies will shy away from these non-traditional forms of risk management. At least one Bermuda finite risk reinsurer, Inter-Ocean Reinsurance, has bowed out of the market since the probe took this turn.

But Dr. Hartwig thinks the fears about finite risk ? with several Bermuda insurers and reinsurers subpoenaed for information on either their use or sale of this type of product by either Mr. Spitzer?s office or the SEC ? won?t ultimately spell the end of this market.

?With transparency, disclosure and adherence to the appropriate accounting guidelines, Bermuda and the Bermuda insurance market, generally speaking, are going to remain healthy. And, after some period of being fearful of it, finite reinsurance products will remain a mainstay in the reinsurance marketplace.

?I don?t think these probes are a death sentence for finite.?

But how long the regulatory probes will take to play out remains unclear.

?The area of finite reinsurance, the accounting issues, the oversight control ? all those issues have some way to go and it is not clear what the resolution is going to be,? Dr. Hartwig said.

?A few months ago it looked like it was going to be OK. We had a certain number of illegal acts uncovered, we?ll settle these issues and the book is closed. What we have now is a number of far-ranging issues that have become international in scope.

?They are very complex in nature and have attracted the interest of no fewer than 42 regulators, or attorney generals in the United States and others abroad. I would say the horizon for insurance-related issues has in fact been expanding over the past month or two while early this year it may have actually appeared that the issue might be basically resolved by the middle of this year. That no longer appears to be the case.?

However, Dr. Hartwig said the investigations of bid-rigging between brokers and insurers are nearly at an end.

He gave Bermuda a thumbs-up for being a key provider of re/insurance capacity globally ? and said that a few cases of misconduct within the Island?s insurance sector wouldn?t take away from that.

?Bermuda is absolutely essential to maintaining the capacity in all segments of the US insurance marketplace. And that capacity is vital,? Dr. Hartwig said. ?The fact that some of these offshore entities [in question are in Bermuda has nothing to do with any systematic problems there. It is simply another ripple in the whole area of transparency and disclosure...

?The transparency and disclosure issues started off purely as a domestic issue ? ?Should buyers know how brokers are compensated?? That didn?t involve Bermuda.?