Roger Crombie

In less than two months after September 28 last year, more than $20 billion was committed to the global insurance industry. This new capacity may be the greatest allocation of capital since the Marshall Plan rebuilt Europe after World War II.

In total, $12.64 billion has headed or will be headed to the Bermuda insurance and reinsurance market. Of that, $7.48 billion is start-up capital, largely from traditional sources in insurance and the capital markets.

Existing Bermuda companies are raising $5 billion more dollars, which represents, broadly, the $2.5 billion in estimated claims from September 11 that will flow out of the Bermuda market and a like amount of new capital, brought in to take advantage of the hard market.

Six new major insurance or reinsurance companies have brought clean capital to the Bermuda market, reconfiguring the top end significantly. Before September 11, Bermuda had six companies with $1 billion dollars in capital; it now has 11.

The market is simply aboil. In an unusually frenzied renewal season during a suddenly extraordinary hard market, Hamilton, in which all of Bermuda's insurance is concentrated, has become the capital of the insurance world.

The six new majors are:

* Allied World Assurance Co. (AWAC), commercial property and casualty re/insurance, property catastrophe treaty reinsurance, and specialty lines. Capital: $1.5 billion. Leader: AIG. Chief executive officer: Michael Morrison. AIG contributed $291 million; Chubb and GSCP $250 million each. Writing property catastrophe treaty reinsurance through an exclusive agency agreement with IPCRe, up to $12.5 million per program.

* Arch Re, broad-based multiline reinsurance. Capital: $1 billion. Owner: Arch Capital Group. CEO: Paul Ingrey. Warburg Pincus and Hellman & Friedman provided $750 million.

* Axis Specialty, property catastrophe, property risk, aviation and aerospace, and marine. Capital: $1.6 billion. Founder: MMC Capital's Trident II. CEO: John Charman. Mutual Risk Management is providing administrative support and Andrew Cook will be CFO of both until he joins Axis full-time next year. Charman returns to Bermuda not long after leaving Ace.

* DaVinci Re, property catastrophe. Capital: $500 million. Leader: RenaissanceRe. CEO: James Stanard. State Farm is the latest partner for Renaissance, which also released a further $40 million to its Glencoe subsidiary.

* Endurance Specialty, commercial property and casualty insurance and reinsurance. Capital: $1.2 billion. Leader: Aon and Zurich Financial Services. CEO: Kenneth LeStrange.

* Montpelier Re, property reinsurance through the broker market. Capital: $1 billion. Owner: White Mountains Insurance Group and Benfield Group. CEO: Tony Taylor.

Given Bermuda's population, which is probably about 65,000, the capital inflows represent about $200,000 of additional insurance capacity for every man, woman, and child in Bermuda. More will undoubtedly follow.

Having won the approval of the OECD and the other alphabet soup initiatives, Bermuda could be expected to welcome its new prominence with open arms. Tourism, the island's only other means of support, has been cut in half in the same period in which the money has flowed in. The Progressive Labour Party's policy had been to encourage and stimulate the visitor industry and to certainly not discourage international financial services.

Americans and Europeans may not be traveling as they once did, but their money is moving around fine. Some would say, though, that Bermuda's economy is steaming ahead in the wrong direction. The hustle and bustle, the pressure on roads, schools and top-end housing, the need for new work permits as Bermuda's intellectual pool deepens--none of this is entirely music to the ears of all concerned.

The government hopes to recapture a time when Bermudians were less stressed. Global capital appears intent on providing Bermudians with a different destiny.

Roger Crombie is a Bermuda-based journalist who writes frequently for Risk & Insurance.

COPYRIGHT 2002 Axon Group

COPYRIGHT 2002 Gale Group