Bermuda captured four percent of the global reinsurance premium, the 1997 edition of Standard & Poor's Global Reinsurance Highlights has reported.

The report stated that the countries increasing market share during the two years through 1996 were Switzerland, Bermuda, Italy, and to a lesser extent, the UK.

Germany maintained its position as world leader in 1996 premium volume, controlling 31 percent of the industry's net premiums, down significantly from 36 percent in the 1994 fiscal year.

The US is second at 26 percent, followed by Switzerland (14 percent), France (six percent), the UK (five percent), Italy (five percent), Bermuda (four percent) and Australia (two percent).

The global reinsurance industry completed another year of improved performance as measured by combined ratio -- a measure of underwriting profitability -- which dropped 1.3 percentage points to 103.8 percent in 1996.

The improved results were mainly driven by both the largest global reinsurance groups and Bermuda companies.

A special segment of the report (Bermuda: An Opportunistic Market) said that the immediate objective of Bermuda companies is global diversification of their risk portfolio by product line and region.

And longer term, S&P believes the Bermuda companies will migrate toward multi-line companies with global business profiles.

Many of the significant finite reinsurers remain in Bermuda, led by that market's forefather, Centre Reinsurance Co. (Bermuda) Ltd., which smoothed the path of risk innovation for other companies.

The report lists Centre Re's 1996 premium volume at nearly $900 million ($897,702,000), nearly $181 million or 25.4 percent better than 1995 ($715,970,000).

But with a combined ratio of 116.6 percent, it is starkly contrasted by the several other Bermuda reinsurers listed in the survey which boast a much better figure.

PartnerRe, for example has a 1996 combined ratio of 25.6 percent, one of the two best of the 172 global reinsurers surveyed. Tempest Re, acquired by ACE Ltd. this year, had a combined ratio of 26.5 percent.

The catastrophe reinsurers have been faced not just with falling prices, but an apparent improved management of catastrophe exposure by primary insurers, through the use of sophisticated modelling techniques.

Such techniques have encouraged the insurers to retain more risk and extend coverage into higher layers, reducing their total purchasing of reinsurance protection.

S&P forecast more downward pressure on pricing because of the additional capacity being provided by the capital markets in the limited, and relatively expensive, success of their securitised catastrophe risk products.

The thought is they are likely to have their greatest impact on the market when the demand for catastrophe reinsurance rises in the aftermath of the next mega-event or series of events.

The report states: "The potential pool of capital available through the capital markets will effectively limit the ability of reinsurers to raise prices to the levels after Hurricane Andrew and the Northridge Earthquake.

"For many reinsurers, the question is increasingly one of defining the price floor at which it is no longer economical to continue a programme. At least in a few cases, programmes were dropped and in some regions of the world, notably the UK and Japan, total property reinsurance premiums declined.'' S&P sees the paradox for Bermudian reinsurers as the substantial accumulation of capital over the past three years despite price declines from their peak in 1994.

The performance of the Bermudian reinsurers reflects that catastrophe losses have not hit the high excess covers purchased under their reinsurance programmes, leading to impressive returns.

The report's authors said that prudently absorbing the myriad of acquisitions of the Bermuda reinsurers remains a key issue, as the companies seek to compete in the global reinsurance market.

"Alternatively,'' they said, "some of the independent reinsurers remain attractive acquisition targets to larger, multi-line companies which might seek to obtain the underwriting expertise of this highly technical business.

"Diversification should benefit the Bermudian reinsurers over time by providing additional premiums to offset declines in the property cat reinsurance market leading to a decrease in the expected volatility of earnings.''