Investors in a wave of new Bermuda reinsurers are likely to consider various options when the time comes to cash out their initial investments, insurance economist Robert Hartwig said yesterday.

?The normal pattern would be to take a company public,? he said, citing the experience of previous Bermuda reinsurers. This time going the IPO route isn?t the only path that could be pursued, he added.

?You could have, given the way that these companies were initially capitalised by private equity and hedge funds, (investors) sell a controlling stake to an existing company,? said Dr. Hartwig, chief economist of the Insurance Information Institute, a New York-based trade organisation that tracks the sector?s developments and issues.

Private equity firms like Thomas H. Lee Capital Partners, the Blackstone Group LP, and Trident III LP, along with hedge funds like the Citadel Group and West End Capital, created a string of Bermuda-based insurers and reinsurers late last year to take advantage of expected premium rate increases after costly storm damage from Hurricane Katrina and other storms. The new companies are backed, in total, with about $10 billion in capital.

John Berger, chief executive of Harbor Point, said it was too early to predict what course his company will take. Harbor Point, the biggest new Bermuda reinsurer with $1.5 billion in initial capital, was formed last October by insurance company Chubb Corporation and Trident, a private equity fund managed by Stone Point Capital. Mr. Berger said, generally, the goal of investors that poured money into new reinsurance companies was to make a return on their investment, in a reasonable time, through a public offering.

Initial public offerings take place when privately-held companies decide to offer shares to the public for the first time.

Becoming a public company can benefit an insurer in several ways, including adding to its surplus and capital, usually to fund growth and to pay off debt from credit facilities. Investors that provided seed capital for the start-up can choose to sell all or some of their stake through the IPO, usually at a premium.

Bermuda has seen waves of capital flowing into the market to back new insurers at least three times previously. And typically initial investors have been able to recoup their investments, at a premium, when the companies make their initial public offering.

The amount of time insurers take to jump into the public market can vary. There are examples like Ram Re, a financial guaranty reinsurer that announced on Friday it plans to sell its shares publicly, taking eight years to take the step. Others waste no time at all.

In November 1993, PartnerRe Ltd. was formed as a specialised catastrophe reinsurer by then president and chief executive Herbert Haag. The same month it pursued its public offering, enabling the company to start with a total capitalisation of about $1 billion.

Mr. Berger said a company?s decision to go public had a lot to do with timing and market forces.

?In the next few years, if we are not growing we will sit down with investors? he said, and look at the options.

He also didn?t rule out growing the company through acquisitions, if it made business sense. Mr. Berger said growth was not Harbor Point?s goal in and of itself.

?Things happen so quickly I would not discount any reasonable possibilities. We could remain independent or make acquisitions. I would put them all out there as reasonable outcomes.?

Within about three years most of the 1993 reinsurance companies had staged initial public offerings, and the ?Class of 2001?, a wave of insurance and reinsurance companies that formed after a void in capacity following the September 11, 2001 terrorist attacks, came to the capital market even faster.

Montpelier Re and Platinum Underwriters were the first 2001 companies to tackle an IPO, with both listing on the New York Stock Exchange in October 2003, before either had celebrated a first birthday.

Dr. Hartwig said one can?t necessarily count on the 2005 companies following the same path as the earlier Bermuda insurers, because of the unprecedented influx of capital. About $20 billion came into the Bermuda market both to back the new companies and to replenish the coffers of established companies hit by storm losses last year. ?Some may be surprised at how quickly capital entered and some may be surprised at how quickly it exits.?

Ed Noonan, chief executive of Validus Re, a $1 billion reinsurer formed last year by Aquiline Capital Partners, a new private equity fund run by former Marsh & McLellan chief Jeffrey Greenberg and partners, said he expects the new reinsurers will eventually pursue initial public offerings.

?One of the things that seems clear after the events of 2005, if you are in this sector you need access to the public markets,? he said, citing how quickly Bermuda?s established insurers and reinsurers were able to raise in the region of $9 billion to replace the losses from Hurricane Katrina and other 2005 catastrophes.

?The existing companies proved that to be a necessity (to be able tap capital markets quickly). Most of the companies at some point will look to become public,? he said, speaking generally.