The “biggest wild card” in federal financial services regulatory reform for insurers is the Federal Insurance Office, according to a report released Monday by Deloitte L.L.P.

The report—“Insurance Industry Outlook: High Hurdles Loom in 2011 & Beyond” —notes that insurers lobbied hard and often successfully to minimize the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on their industry.

“However, insurers were not excluded from the law's purview,” Deloitte said in the analysis. “Thus, the battle over Dodd-Frank is far from over, and the fallout is anything but clear.”

How the FIO will develop is the “biggest wild card” in regulatory reform, according to Deloitte. The report said even though the law doesn't give the new FIO much “overt regulatory authority,” the agency could significantly affect insurer operations. For example, the report noted, the FIO can demand data from insurers to produce a series of reports mandated by the law.

“Although FIO is required to seek out existing sources first, it can compel carriers to produce data if the information needed is not accessible otherwise,” the consultant said. “That has the potential to put a greater strain on insurer operations as well as raise compliance costs.”

As for other trends affecting insurers, Deloitte said the industry can increase sales and profits despite the still-weak economy. For example, the health care, technology and environmental sustainability sectors present opportunities for property/casualty insurers targeting those niches, Deloitte said.

The report also noted that many property/casualty insurers have excess surplus in their prime lines of business, which could lead them to seek growth in other specialty markets.

“However, this is a strategy that could present its own risks, particularly in such a soft commercial market, with premium rates falling and competition stiff even for less-than-prime risks,” said the report.

Regarding enterprise risk management, Deloitte said that while information is the “lifeblood” of ERM efforts, there appears to be much room for improvement in data management. Deloitte noted that its 2010 global risk management survey of chief risk officers at global financial services firms found that only small percentages of respondents characterized their organization's risk data strategy and infrastructure as “extremely effective.”

The report is available at www.deloitte.com.