@$:@bylinerg:<*p(0,0,0,+1,0,10.152,g)>By Alex Wright@bodyindent:<*t(0,0," ")>The recent credit crunch will not have a significant impact on Bermuda's insurance and reinsurance market, according to experts.<*t(0,0," ")>Fears had been raised over private equity firms and hedge funds' capacity for investment in the Island's insurers and reinsurers following the set up of 82 new companies in the sector in 2006.<*t(0,0," ")>This follows US private equity giant Blackstone's warning that the tightening of the world credit market will make it more difficult for firms in the industry to secure new takeovers. In recent years, firms such as Blackstone have used cheap credit from banks to fund a takeover spree. <*t(0,0," ")>But cheap credit is now harder to find because of weakness in the US sub-prime loans market and higher interest rates. <*t(0,0," ")>However, Dr. Robert Hartwig, president of the Insurance Information Institute, played down those claims, pointing out that most of the financial backers affected by the squeeze of the global credit market had their money tied up in the US sub-prime mortgage sector and not the property and catastrophe insurance and reinsurance in Bermuda.<*t(0,0," ")>"First of all we have probably seen the zenith in terms of the formation of new companies with hedge fund capital," he said.<*t(0,0," ")>"That had probably reached its peak because of ordinary cyclical conditions and it would be a mistake to attribute the impact of investment in places like Bermuda as a result of the credit crunch as opposed to ordinary cyclical forces, but that said, it is the case that the modus operandi of private equity firms like Blackstone is going to be damaged by the current credit crunch and that should not come as any surprise.<*t(0,0," ")>"The Blackstone's of this world were born into the world flushed with easy credit and so what we are going to expect to see is far less domination as far as private equity activity generally speaking because the cost of credit has risen, but also because most of the opportunities have been exploited.<*t(0,0," ")>"So in summary, it does not have a significant impact in Bermuda's insurance and reinsurance sector."<*t(0,0," ")>But Dr. Hartwig predicts that the credit market will settle down by the end of this year or the first quarter of next at the latest. <*t(0,0," ")>"What I think is more important is that the private equity companies have demonstrated that there is a need to raise large amounts of capital for the the property and catastrophe insurance and reinsurance business, but they have the skills and the knowhow to do it," he said.<*t(0,0," ")>"The companies of '2000 and X' are going to cost more to create than the companies of 2005 or 2001, but up to now the private equity firms have been able to grow and prosper because of that easy credit and they are not going to go away and they are now part of the fabric of the insurance world."<*t(0,0," ")>And he believes it is the credit crunch which is to blame for the current state of the sub-prime mortgage market .<*t(0,0," ")>"Step back and look at what has initiated the cause of this credit crunch - it is the sub-prime mortgage market," he said.<*t(0,0," ")>"A small proportion of people that can't afford to pay their mortgage in the US are going to have a negligible effect on the insurance and reinsurance world.<*t(0,0," ")>"It is also the case that a lot of this money for investment in Bermuda's insurance and reinsurance market comes from Eu<*t(0,0," ")>rope, where, although they incur a part of the debt, they are far less vulnerable to those kinds of problem, and although this credit crunch will be with us for a while, it won't bring down the global financial market.<*p(0,12,0,10.5,0,0,g)><*t(0,0," ")>"The natural disaster risk has no relationship whatsoever with the performance of sub-prime loans or mortgage-backed securities."<*t(0,0," ")>David Bradford, editor-in-chief at Advisen, concurred with that view.<*t(0,0," ")>He said: "I don't think the credit crunch is going to have much of an impact on the insurance and reinsurance market in Bermuda.<*t(0,0," ")>"It could have an effect on individual companies who have portfolios in the sub-prime market, however.<*t(0,0," ")>"So far, what I have seen coming out of earnings reports is the companies that have reported exposure to it are negligible."