The Bermuda Insurance Index Fund has lowered its initial investment fee from $5,000 to $2,500 in a bid to get more people on board.

The Bermuda Insurance Index Fund is an open ended mutual fund that invests in local insurance companies and is managed locally by Kast Investment Management and MRM Securities Ltd.

Kast Investment Management president Anne Kast said the fund was launched in 1998 following meetings between Ms Kast, Robert Mulderig of MRM and William Woods of the BSX.

Ms Kast had toyed with the idea of starting a fund comprised of local insurance companies, and two months after the Bermuda Insurance Index was launched, the Bermuda Insurance Index Fund was launched.

Criteria for companies to be included in the fund include headquarters and senior management based in Bermuda, minimum capitalisation of $100 million and listing on the BSX and a national exchange such as the NASDAQ or NYSE.

As of June 30, companies included in the fund and the weight of each (percentage in brackets) were XL (34), ACE (30) Everest Re (11), Partner Re (9), Renaissance Re (5), Trenwick (3), Annuity and Life (3), IPC Holdings (2), MRM (1), Stirling Cook Brown (1) and PXT Re (1).

Ms Kast also highlighted the new insurance and reinsurance companies setting up on the Island following the September 11 attacks and said that if these companies became listed on the BSX and a foreign exchange, they too would probaby be included in the index fund.

She said that since the fund's launch three years ago, the number of investors has remained relatively flat and their intention was to broaden the base of investors by making the fund more accessible to everyday investors through initiatives such as lowering the initial investment from $5,000 to $2,500.

Timing has been a key issue with the fund. When it was launched, Ms Kast said there was a downturn in insurance stocks, but they launched the fund anyway. Despite an initial decline, the fund has appreciated 26.9 percent since its inception at an annualised growth of 7.91 percent, compared to the S&P 500 index which returned 16 percent during the same period, or 4.4 percent annualised growth.

However she said the fund will be more volatile as it is a basket of 12 stocks compared to 500 stocks.

Ms Kast said that as they were about to relaunch the fund, the terrorist attacks of September 11 occured, pushing the fund from $11 down to $9. However, within weeks, the fund had recovered, and she feels it is a good long term investment opportunity.

Prior to September 11, insurance premiums had increased by 20 to 30 percent and Ms Kast believes that in the wake of the September 11 attacks, rates will firm even more.