Leading global banking investment firm Goldman Sachs has advised investors to put their money into three top insurance companies based in Bermuda.

Goldman told them to own insurers that are best positioned to weather the downturn in the industry's cycle, such as AIG, Everest Arch Capital and RenaissanceRe.

American insurer AIG has offices on the Island, while Everest, RenaissanceRe and Arch Capital are based in Bermuda, and Goldman believes they can all generate the highest returns and produce the most visible book value growth.

Goldman downgraded the property and casualty insurance sector yesterday after fears were raised the insurance industry will struggle to grow premiums in 2008 as profitability deteriorates, with Goldman analysts cutting their view on the sector to neutral from attractive.

"The risk of fundamentals deteriorating increases as we approach 2009," Thomas Cholnoky and his analyst colleagues at Goldman, wrote in a note to investors yesterday.

Investors should avoid Progressive Corp., Safeco, Markel Corp. and Hartford Financial, which are more likely to disappoint on earnings or book value growth and some of the stocks are over-valued, Goldman said.

Insurance brokers, such as Marsh & McLennan, Aon Corp. and Willis Group, all of which have a presence in Bermuda, are likely to face increasing pressures on revenue growth as well as stagnant operating margins, Goldman added.