About 90 buyers and sellers of reinsurance from Bermuda, the US and the UK are attending a two-day seminar at the Princess Hotel in Hamilton, hosted by Tillinghast, the division of Towers Perrin, one of the world's largest firms of independent management consultants and actuaries.

The conference, which winds up today, is entitled "Catastrophe Exposure Management and Reinsurance''.

The programme is useful to insurance company managers involved with the purchase of catastrophe reinsurance and for those looking for unique ways to finance and transfer catastrophe risks.

Reinsurance professionals, brokers, regulators, consultants and others who need to know about catastrophe exposure management and reinsurance would also find the seminar interesting.

Providing a broad range of actuarial, risk management and general management consulting services, Tillinghast deliberately timed the conference between the hurricane season and the January reinsurance renewal season.

Among yesterday's speakers was Mid Ocean Reinsurance Company Ltd.

senior vice president and underwriter Mr. Henry Keeling: Levelling criticism at US state insurance regulators, a top Bermuda reinsurance boss suggested that the industry may not develop adequately in order to provide sufficient catastrophe capacity for the United States.

In making this statement, Mr. Henry Keeling, senior vice president and underwriter at Mid Ocean Reinsurance Company Ltd., pointed to price restrictions that prevented such capacity from emerging.

"State regulators,'' he said, " will not allow free market economics to apply, at least in an upward direction. Artificial insurance rates are kept in force in Florida so as not to damage the economy, particularly the tourist industry.

"Over 40 per cent of the population in the US live in coastal counties and the figure will certainly grow. It is not possible for the industry to continue writing business as if most people lived in large industrial towns or the rural Midwest, when in fact the majority of the population are now perhaps only five feet or less above sea water.

" Therefore the industry is faced with an inadequate base from which to cover its catastrophe exposures and the reinsurance industry will therefore not develop adequately in order to provide sufficient catastrophe capacity.

"Perhaps some of the exposures are too large even for the reinsurance industry to cope with.'' Mr. Keeling continued that if the catastrophe capacity available is only $6-10 billion, the potential exposure in all of those US coastal areas, as seen by the National Disaster Coalition, would mean that the industry is no where near being able to solve the problem.

"It may well be that these problems are themselves the fault of insurance regulators who will not allow the free market to control its own standards.

The answer to this, we are told, is government intervention. And maybe that is the inevitable result of a `nanny' society.'' Mr. Keeling said that it is the insurance consumer that will ultimately bear the cost, whether it is done by borrowing off the state or by imposing taxes in a state or Federal jurisdiction.

The question he asks is, "Is a state or Federal government better at distributing that cost than the insurance companies? You have a large bureaucracy which may try to devise a simple, single plan for an enormously complex industry.'' No matter what government plan is devised, he said, some clever insurance executives will find a way to exploit loopholes in such new schemes for deliberate profit or deliberate increase in market share.

Mr. Keeling also advised that Bermuda this year may have achieved as much as a 20 percent market penetration in the catastrophe business, but it may be over-weighted in the US.

The total ratio of premium to capital in the Bermuda market place is currently 0.325:1, and he said that represents quality and security, relative to other markets, elements that are in increasing demand from discerning clients.

He said that the total capital available in the catastrophe reinsurers marketplace is about $4 billion.

Bermuda's catastrophe reinsurers had combined premium volume of $1.2 billion for the first six months of this year and Mr. Keeling projected that the total premium for the year will rise as far as $1.3 billion. And out of that, he estimated, one billion dollars will be related to catastrophe excess of loss business, representing 15-20 per cent of the world's catastrophe market premium in just 12 months.

"The total (primary catastrophe) capacity available in the world has risen to approximately $272 million, from a low of $170 million in 1993.

"More impressively, while London has halved in five years and US domestic capacity has remained essentially stable, Bermuda has come from nowhere to be the largest single market available ($90 million).

"It may well be stated now that the US comprises the largest part of the Bermuda companies' portfolio. If it were the largest part of their portfolio, it is not entirely surprising at present, since the US market itself is by far the largest single market in the world.'' There were presentations during the conference on catastrophe modelling, showing the kind of detailed computer analysis that goes into the individually tailored service provided by Bermuda.

It is expected to provide a significant difference ultimately between the analytical underwriting provided by Bermuda companies and the broad brush approach still being used in traditional markets.

That, said Mr. Keeling will enable Bermuda to increase its share of quality clients' exposure at prices that barely reflect that exposure.

"In the worldwide scenario we have a situation where there is still significantly too little capital for capacity for the largest insurance market, the USA. Here in Bermuda, whilst not all companies are not full, a significant number are full in certain areas of the US.

He said that the international market, on the face of it, appears to be a different story, with excess capacity available for UK, Japan and Australia.

But in some cases, like Japan, it remains artificially controlled.