Bermuda may have banned the sale of guns in its cyberspace, but it has permitted the gun manufacturers to sell themselves insurance from Bermuda.

A company called Sporting Activities Insurance Ltd., the Washington Post reports, has been set up expressly to sell insurance to gunmakers, who sit on the SAI board.

"Gun companies have always found it difficult to get insurance because of the nature of their products,'' the Post's Sharon Walsh reported.

American gun companies are facing a barrage of insurance claims, similar to the wave which hit the tobacco companies recently.

At present, cases against the industry have been started in 28 cities and states. Legal defense costs are already measured in the millions of dollars.

Gun companies, like any insured business, looked to their insurers to pay for their defence and contribute to necessary legal settlements or judgments.

"But many firearms makers and sellers have been notified by their insurers that they have no intention of paying what could be astronomical legal bills or any judgments associated with the suits,'' said the Post .

Even SAI will not guarantee that it will pay to defend its clients. "Some are going to be covered, some are not,'' said David Pickering, an SAI director and spokesman. The firm provides product liability coverage, but not general liability policies, he said.

Several lawsuits already have been filed by industry members against their underwriters in what some gun company officials say could be the beginning of an all-out war between insurers and gun companies.

"It'll bankrupt them all,'' said Daniel Abel, an attorney in the Safe-Gun Group, an organisation of New Orleans lawyers suing gun companies. "If the insurers walk away from the gun companies, they are looking at defending themselves in 28 major lawsuits.'' The insurance issue is "crucial'', said Robert L. Carter, an insurance coverage lawyer at McKenna & Cuneo in Washington, D.C. "The gun companies are right now looking at the tobacco litigation and asking whether their companies are viable. Insurance is the last safe harbour for the gun companies.'' In September, Maryland's Beretta USA Corp. sued its insurer, Chubb Corp., in federal court in the Northern District of Maryland after Chubb refused to contribute to Beretta's defense. The National Shooting Sports Foundation also sued Nationwide Mutual Insurance over its refusal to pay the industry association's defence costs in a case pending in New Orleans. In that case, the judge ordered the insurer to pay.

Gulf Insurance of New York has stopped writing policies for gun companies, and Frontier Insurance said it no longer will be a player in insuring gun shops.

Insurance for gun companies will become scarcer and more expensive, said Robert Hartwig, vice president of the Insurance Information Institute in New York. "It's very difficult to find insurance when your industry is in the midst of a crisis,'' Mr. Hartwig said. "It's like trying to insure a house when it's in the path of an oncoming hurricane.''