Mystery surrounds a new mega-insurance venture which is about to be set up in Bermuda which is believed to rival ACE and XL in size.

The company, which has not been named, is a joint venture between US insurance giants American International Group Inc, Chubb Corp and Goldman Sachs Group Inc and is believed will employ some 200 people on Island and will capital of more than $1 billion.

The Royal Gazette understands that the three companies will invest about $500 million to form the business.

Sources close to the companies said it was going to be a huge property and casualty business and an operation with possibly 200 or more employees and are expected to attract top ranking insurance executives from around the world.

This would make it the fourth insurance company to have set up in the past month to take advantage of conditions in the wake of the September 11 attacks on the US. Spokesmen for AIG and Chubb declined to comment and calls to Goldman were not returned by press time.

Calls to Government and the Registrar of Companies about the new insurance venture were also not returned by press time.

Rumours have been rife on the Island since the Bermuda Angle said that plans were afoot for a new large insurance company to take advantage of the lack of capacity and higher rates in the property casualty markets following the World Trade Center attacks.

But new rules that mean shareholders have to know the same information issued to press. Robert Hartwig, chief economist at the Insurance Information Institute in Washington D.C., said he had heard the rumours, but not specifics about the deal.

"I can offer no detail other than to say that as expected, Bermuda is going to play a key role in filling the coverage gaps we are going to find following September 11," he said. "Shareholders in these three companies are used to the companies moving into niches as they arise. But we do not know what is going to be announced or when it is going to be announced."

On Wednesday The Wall Street Journal and Bloomberg reported that it was the three US insurers who were setting up shop on the Island, and reported that they filed an application to set up a company in Bermuda on Tuesday according to Shelby Weldon, Bermuda's inspector of companies. Calls to Mr. Weldon were not returned by press time.

Last month's terrorist attacks may cost the industry as much as $70 billion, making it the largest insured loss ever.

It has pinched the supply of insurance and companies have raised their prices by between 30 and 60 percent in most lines.

The new businesses would enable the US companies to expand their reinsurance operations. In the mid-1980s ACE Ltd.and XL Capital Ltd. were set up by Marsh and other US investors to provide big-ticket liability insurance as large court awards dried up coverage in the US. In the early 1990s, six major reinsurers were set up to soak up demand for large-scale property catastrophe reinsurance after Hurricane Andrew. Those reinsurers included RenaissanceRe and PartnerRe.

The New Wave of Bermuda's reinsurers

Arch Capital Group Ltd. to set up Arch Reinsurance backed by two private equity firms, Warburg Pincus and Hellman & Friedman, which would invest a total of $750 million in shares and warrants in Arch Capital. The new venture currently has about $500 million in capital.

RenaissanceRe Holdings Ltd. is setting up a new venture called DaVinci Reinsurance Ltd. with $500 million backing from investors, including State Farm, the largest US insurer.

Insurance broker Marsh & McLennan Cos. Inc. has also set up new firm, Bermuda-based Axis Speciality Ltd., to offer property, aviation, war and other insurance.

Aon Corp. has added some property and reinsurance lines to its own underwriting unit, Combined Speciality Corp.