Insurers need to respond to the financial crisis with self-discipline and commonsense.

Life company chief executive officers gave that assessment here during a CEO panel at a life insurance industry executive conference.

The conference, the 19th in an annual series, was sponsored by Dewey & LeBoeuf L.L.P., New York; Ernst & Young L.L.P., New York; and Summit Business Media L.L.C., New York, the parent of National Underwriter.

David Wyss, chief economist with Standard & Poor’s Corp., New York, predicted at the conference that the U.S. will go through a moderate but long recession.

The stock market should bottom out this year, and the economy should hit bottom in the spring of 2009, Wyss said.

But consumer spending will continue to slow, because consumers are living, on average, at 139% of income, Wyss said.

If credit remains “locked up,” the prognosis could be worse, and the United States could face a “mega” recession, Wyss warned.

During the CEO panel, Patrick Mannion, president of Unity Mutual Life Insurance Company, Syracuse, N.Y., said the current situation reminds him of his experience as a volunteer firefighter.

Firefighters are taught to save themselves first and others second, and to let everything else fall into a third category, Mannion said.

Today, companies must protect their own solvency, so that they can protect policyholders and deal with the rest afterwards, Mannion said.

Peter Tedone, president of VantisLife Insurance Company, Windsor, Conn., said it is important to put effective risk management programs in place at least 6 months before they are needed.

Risk management should be handled in a calm environment and not in a crisis mode and under pressure, Tedone said.

An executive must “never underestimate value of common sense over sophisticated analytics,” Tedone said. “Unfortunately, ERM became more an exercise in sophisticated analytics.”

This is not a good time to try to compete based on price, because, if low prices lead to a need for capital, the capital markets are not likely to be friendly, Tedone said.

David Walsh, president of Amalgamated Life Insurance Company, New York, talked about the importance of sound underwriting and good pricing.

There’s “a flight toward products with less risk,” Walsh said. “Underwriting discipline [is] absolutely essential.”

Amalgamated recently lost a large group case because the loss ratio was 58 cents and the company that won put in a bid at 52 cents, Walsh said.

The winning bidder probably was planning to make up the difference with its investment portfolio or with volume, but, a year from now, the business may be up for bid once again because the case probably will be unprofitable, Walsh predicted.

Walsh also echoed what Tedone was saying about scarcity of capital.

“Ten years ago, the capital markets were pulling up dump trucks and dumping out money,” Walsh recalled. Today, he said, “when you really, really, really need money, you really, really can’t find it.”