in the provision of reinsurance coverage for captives is now using its burgeoning Bermuda base to chase a significant slice of the US market.

And Sphere Drake Underwriting Management (Bermuda) Ltd. (SDUMBL) has moved its gross capacity for any one casualty programme up to $5 million for 1995.

Maximum capacity available for property coverages remains at $2 million.

Premium income growth has allowed the company to take on a larger line.

Premium income is projected at $90 million for the coming year, Sphere Drake's fifth in Bermuda, a more than 233 percent increase since 1991, when premium income was $27 million. It rose to $39.3 million in 1992, $45.2 million in '93 and $68 million in 1994.

The company has entered into a contractual arrangement with a US company, Transatlantic Reinsurance Company, to offer the New York firm security to US based cedants. Transatlantic must, however, give prior clearance on a case by case basis.

Transatlantic is rated by the A.M. Best rating service at A IX, and has capital and surplus of over $300 million.

The arrangement is in respect of self insured entities domiciled in the US, such as captive insurance companies, pools, funds, risk retention groups, trusts or other self insured retention entities which are permitted to buy reinsurance.

SDUMBL president, Mr. Jonathan Crawley, said: "We put out the paper of a UK company. It is as superior as anybody's paper for the provision of reinsurance in any domicile, except in the United States.

"There is a growing domestic captive insurance industry, particularly, in Vermont, Hawaii and Colorado. When we go to offer reinsurance to captive companies or risk retention groups domiciled in the US, as an alien or foreign reinsurer, we are not competing with US domiciled reinsurance companies on a level playing field.

"So, we needed to make an arrangement with a US domiciled reinsurance company, under which they would allow us to offer their paper. That's the arrangement we have made with Transatlantic Re, but only for US domiciled captive and risk retention group business.

"That arrangement is for the same limit as Sphere Drake has, namely $5 million. I would stress that these are alternatives and not additions. When the ceding company is in the US we would hope to use Transatlantic paper. When it is not in the US, we use Sphere Drake paper, always for the same limit of $5 million.'' All submissions for such contracts are directed to Sphere Drake's Bermuda office, through which reinsurance documentation executed by Transatlantic is provided.

Through reciprocal referrals between the parties and through the broker market, generally, the new arrangement allows both companies to expand within their areas of expertise while helping to provide needed additional reinsurance capacity to a wider client base.

SDUMBL parent, Sphere Drake Holdings Ltd. in the UK underwrites international property and casualty insurance and reinsurance business through its operating subsidiaries in London and Bermuda. The company continues to develop its presence in the Alternative Risk Transfer (ART) market from Bermuda.

An analysis of unaudited underwriting results for the nine months to the end of September shows net premiums written here of nearly $41.2 million, a 10.6 percent of the total writings for the parent company. Loss and loss adjustment expense ratios for the Bermuda arm was 62.9 percent for that period.

Net premiums written for the Bermuda ART business increased by 8.2 percent in the 1994 third quarter, and by 44.1 percent in the first nine months of the year, compared with the prior year's periods.

SDUMBL operates on behalf of its UK affiliate company, Sphere Drake Insurance plc and also offers gross capacity of $2 million for property and multi-peril lines and for other miscellaneous lines.

But Mr. Crawley said that 95 percent of the business is in casualty lines.

Capacity, at $5 million for this year, is up from 1993's capacity of $3 million and $2 million in 1992 and $1 million in 1990.

In describing the successes and the new moves of the company, Mr. Crawley said: "It's progress, in spite of a continuing soft casualty market (since 1988) and who knows when it will change.

"It's soft because casualty underwriters perceive themselves to have `satisfactory' results, despite the fact that they are at over 100 percent combined ratios.

"Nobody dares to start the hardening because they believe that if they do so, they will lose market share.

"We are fortunate because the effects of the soft market are to some extent mitigated, or made less severe for us, by virtue of the area in which we specialise, captive companies and risk retention groups, and by virtue of the fact that we are the only company in the captive field who is domiciled in Bermuda.

"Some 70 percent of the business we write is produced to us by intermediaries who themselves are here in the Island. The significance of that is that if you want to write this business and have first pick at it, you have to be here.

"Our competitors sit in various cities in the US, particularly Greenwich, Hartford and New York, where they are not so easily accessed by Bermuda's brokers and captive managers as we are.''