Island's regulatory environment and the financial strength of certain companies here.

Articles appearing in Lloyd's List prompted the chairman of Bermuda's Insurance Advisory Committee, Mr. Bryan Hall, who is also chairman of Johnson and Higgins (Bermuda) Ltd., to attempt to set the record straight.

The Royal Gazette today reproduces the complete text of an article written by Mr. Hall which appeared in Lloyd's List.

"Bermuda: The new jewel in the reinsurance crown?'' asked the headline on a Lloyd's List feature published in September last year.

That article discussed the rapid restructuring needed to meet the worldwide shortage of catastrophe capacity and argued that new, Bermuda-based capacity could have the most significant effect on the long-term health of the catastrophe excess of loss market.

But there, it seems, the romancing of this particular stone stopped.

"DTI in Bermuda health warning'' was how Lloyd's List headlined its latest offering about the jewel, published just last month.

This report claimed that the Department of Trade and Industry was so concerned about the financial strength of certain Bermuda reinsurers, that it was apparently about to warn UK insurers not to rely on their protections.

Though the DTI later declared it was not about to issue any public guidance on this matter, Lloyd's List insisted that DTI officials were concerned about the security offered by "certain'' reinsurance companies in Bermuda.

It was not stated just who these companies were, though there was repeated reference in the article to the liquidation of a company called Bermuda Fire & Marine, which the newspaper said was worrying the DTI.

What happened between the two articles to trigger such a striking about face? Has the jewel been found to contain a fatal flaw? The truth, as those intimate with the workings of the Island's market well know, is that this jewel is neither flawed nor flawless.

It is functioning in much the same way as any successful commercial insurance market -- attracting capital and resources needed to service a growing customer base.

And it will survive not because it is in some way protected from the ups and downs of commercial reality and the vagaries of global economics or other threats, but because it is exposed to them and able to take them in its stride in the same way as other legitimate commercial markets. And it will have its share of winners and losers.

The non-captive, commercial capital base of the Bermuda market now exceeds $10 billion, with total capital and surplus standing at more than $25 billion.

Many of Bermuda's companies are far more soundly capitalised than their counterparts elsewhere. And it is worth remembering that it is not so much the location of new capital that counts but the fundamental nature of new capital, wherever it is located, against old capital, which carries with it the cost of servicing the past.

But the much-publicised flow of billions of dollars of capital to Bermuda's new catastrophe reinsurers last year was by no means gratuitous.

This very public vote of international confidence in the Island's ability to sustain a vibrant market, was no mere product of good fortune. It was earned, and it was earned the hard way -- by putting years and years of hard work into building Bermuda's reputation as a sound, well-regulated international insurance domicile.

Indeed, as chairman of Bermuda's Insurance Advisory Committee, a statutory body which advises the Minister of Finance on the discharge of his insurance regulatory duties and other matters related to the industry, I can tell you that this work is continuing.

Bermuda's authorities go to great lengths to satisfy themselves about the financial standing of the companies they allow to be domiciled here. Our regulatory environment is under constant review. Right now, discussions are taking place about the scope of new insurance regulations and licensing requirements, which have been proposed by the Insurance Advisory Committee.

These are not the acts of an irresponsible jurisdiction more concerned with attracting business than with carefully putting measurers into place that will help protect distant policyholders.

Bermuda's particular economic perspective is also worth taking into account in any review of Bermuda security. Remember, we cannot afford to get things wrong! Our insurance industry is of much greater economic significance to Bermuda than, say, Britain's is to its national economy or, for that matter, insurance is to the economy of the United States.

In Bermuda's case, the insurance industry is a vital, irreplaceable pillar of a fairly fragile economy.

So for these and other reasons, the insurance sector receives particularly close supervision and attention from the industry itself, from our financial authorities and from the newly-strengthened insurance division of our Registrar of Companies. That does not mean to say that insolvency is unheard of in Bermuda.

As with any commercial marketplace, insolvency is a fact of business life. And buyers looking at the Bermuda market need to differentiate with whom they're going to do business, just as with any other market in the world. The difference in Bermuda's case, is that because ours is still a relatively young market, an insolvency can and often does receive more than its fair share of publicity.

So it has been with the controversial liquidation of Bermuda Fire & Marine, a Bermuda company whose London branch wrote business on the failed H S Weavers stamp between 1968 and 1983.

However, it would be grossly unfair and misleading to generalise from the particular and condemn the entire Bermuda market on the basis of problems experienced by one company.

The fact is that Bermuda's is one of the best capitalised markets in the world with by far the greatest concentration of unencumbered capital. And this fact is well known in London.

Our new capital is largely a result of the world's leading brokers such as Johnson & Higgins and Marsh and McLennan and respected, professional carriers such as the Swiss Re, CNA, Gen Re, Zurich Re and Chubb, teaming up with Morgan Stanley, J.P. Morgan, Goldman Sachs, Lazard Freres and other highly reputable investment houses. These are the kind of gilt-edged organisations that attract top credit ratings, not health warnings.

The new, dedicated and highly-professional capacity now available in Bermuda is nothing like the old, so-called innocent capacity of 20 years ago. Indeed, the quality of security of Bermuda's major insurers and reinsurers is amongst the highest in the world and the track record of our regulatory authorities is arguably as good as or better than any other jurisdiction's.

Capital will always seek out its most efficient home. And for businesses that are capital, rather than labour, intensive, Bermuda has been found to be the optimum choice of domicile.

However, despite the fact that Bermuda's aim is to supplement rather than replace capacity elsewhere, there are those who feel threatened by a market that has successfully fought free of its earlier tax haven image and now ranks with the leading commercial insurance markets of the world.

Indeed, the common thread linking much of the media criticism now being levelled at Bermuda, stems from nothing more culpable than the undeniable fact that Bermuda has acquired, to quote a recent Morgan Stanley analyst's report, "prominence in the insurance world'' and "will continue to expand, further increasing investors' interest in the leading companies in this important underwriting market''.

Mr. Bryan Hall.