NEW YORK (AP) — The insurance industry is watching the evolving scandal over the backdating of stock-option grants but believes it has the wherewithal to deal with investor lawsuits or other legal fallout, a property-casualty insurance conference was told yesterday.“We’re obviously following this issue very carefully,” Martin J. Sullivan, president and chief executive of the American International Group Inc. told the gathering. But, he said, he considered it “a manageable issue” for AIG, one of the world’s largest insurers which is headquartered in New York.

Sullivan was among a number of insurance executives and analysts who spoke at the Joint Industry Forum, an annual meeting sponsored by the Insurance Information Institute and other industry groups.

Sullivan said that the emergence of the stock options issue — which has forced hundreds of companies to review their stock-granting policies and has led to several corporate resignations — could result in claims against specialised insurance policies that covers directors and officers.

Matthew Mosher, a vice president with the A.M. Best Co. rating agency, said he expected “an upward spike” in claims over stock-option grants but concluded, “I don’t know that it’s going to be a major issue” for insurers.

Much of the discussion focused on catastrophe coverage in the wake of the massive $62 billion in insured losses reported in 2005 after hurricanes Katrina, Rita and Wilma hit the Gulf Coast and parts of Florida.

The losses from natural disasters dropped to about $8 billion in 2006, the industry estimates.

Pierre L. Ozendo, head of reinsurance operations in the Americas for the Zurich-based Swiss Reinsurance Co., said the decline did not mean the industry could let down its guard. He noted that scientists predict that the world is in for a period of broader, more intense storms, adding that “the risk potential is significant” for insurers.

Ozendo said he believed enough capital could be attracted to the insurance industry to allow it to continue to cover natural catastrophes, but joined other executives in calling for some kind of national backing for terrorism coverage.

On the issue of terrorism insurance, Sullivan argued that it represented “finite capital responding to infinite risk” and required some form of long-term backstop from governments to limit insurers’ risk.