Bermuda is set to get a new reinsurer, Platinum Underwriters Holdings Ltd., which hopes to raise $1 billion in capital, according to a release issued yesterday by the St. Paul Group of Companies.

St. Paul, a United States company which provides commercial property-liability insurance and asset management, said it was going to transfer its ongoing reinsurance operation to a newly formed Bermuda-based reinsurer.

St. Paul said it is to own 24.9 percent of Platinum, and the other 75.1 percent will be offered to the public in common shares and. The company hopes to raise the $1 billion in capital from this initial public offering.

"This transaction is yet another step to improve the competitive positioning of The St. Paul," said Jay Fishman, chairman and chief executive officer of The St. Paul Companies.

"In addition to enhancing the competitive positioning of our reinsurance operations, it will, over time, free up capital to build our core commercial lines, specialty property and casualty, and asset management businesses."

The company will have at its helm veteran insurance executive Steve Newman who will become chairman of new reinsurance company and its chief executive officer will be Jerry Fadden.

In a release issued yesterday St. Paul said a registration statement for the share offering has been filed with the US Securities and Exchange Commission.

It also said that at the time of the closing of the offering, Platinum will reinsure St. Paul Fire and Marine Insurance Company and St. Paul Reinsurance Company Limited for certain reinsurance contracts starting in 2002.

St. Paul will also transfer certain renewal opportunities and related assets of The St. Paul's reinsurance operation, St. Paul Re, in exchange for the 24.9 percent stake in the new company, which will have 9.9 percent of the voting rights.

The company said that the offering is expected to close in about three months, subject to regulatory approvals and market conditions.

St Paul also said Platinum will not reinsure the reinsurance liabilities of St. Paul Fire and Marine Insurance Company and St. Paul Reinsurance Company Limited relating to reinsurance contracts incepting prior to January 1, 2002 and St. Paul will retain the reserves related to those liabilities.

"We are comfortable retaining the liabilities for the reinsurance business prior to 2002," said Mr. Fishman.

"Given the long-term nature of the liabilities, investment returns from the assets backing the $3.7 billion in net reserves for this business will continue to contribute to our earnings for some time."

St. Paul group said it expects the impact of the transaction, which is subject to market and other conditions, to be immaterial to operating earnings and to result in a net realised capital gain, the amount of which will depend on the results of the offering.

Platinum will conduct operations through operating subsidiaries in the United States, the United Kingdom and Bermuda and will write property and casualty reinsurance on a worldwide basis. Mr. Fishman will serve on the new company's Board.

He said: "Our plan to hold a 24.9 percent stake in Platinum demonstrates our belief in the long-term prospects of its business. The transaction will create in Platinum, with anticipated capital of approximately $1 billion, an organisation focused on a single business - reinsurance - with an operating platform consisting of the ongoing business, management, infrastructure, customer and broker relationships, and systems of St. Paul Re."