plunged the future of the business into uncertainty. A poor year for catastrophes has hit finances. Ahmed ElAmin reports Bermuda's Registrar of Companies yesterday appointed an inspector to investigate the affairs of Bermuda-based New Cap Reinsurance Corporation.

The move comes after New Cap Reinsurance Corp. Holdings suspended the underwriting activities at its Bermuda subsidiary after total capital fell below the required regulatory level of $100 million.

"On the basis of New Cap's projected results, the group overall expects to have capital of approximately $100 million for the year to December 31, 1998,'' the company stated. "However, after statutory adjustments, the capital and surplus of the Bermudian subsidiary will fall below the US$100 million required amount under the terms of its Class IV licence.'' New Cap stated that it anticipated reporting an operating loss of about $90 million for 1998. The company was hit by catastrophe claims of $41.5 million and had to add to its reserves in the second half of 1998. The claims were in addition to the company's $14.8 million loss in the first half of the year.

Registrar of Companies Kymn Astwood yesterday appointed Mark Smith, a partner with Deloitte and Touche to inspect the company.

"New Cap Reinsurance Corporations Holdings Ltd. (a Bermuda holding company) publicly stated that its financial condition was negatively impacted by catastrophe claims and reserve strengthening,'' Mr. Astwood stated. "In very properly regulated insurance environment, there are times when officials must step in to have a closer look to ensure everything is in order. This is one of those times.'' Under Bermuda's regulatory system to be admitted as a Class 4 insurer a company must have at least $100 million in capital and surplus.

Robert Eastham, New Cap's chief operating officer in Bermuda, was not available for comment yesterday.

The company also reported it had put a new underwriting team and underwriting policy in place.

"NCC has only underwritten $50 million premium for the year to date and expects to limit its gross writings for 1999 to between $60 million to $90 million,'' the company stated. "Non-performing lines of business have not be renewed and net risk retentions have been dramatically reduced.'' New Cap said the large loss was due to claims from business written in 1997, the company's first underwriting year. The company was also hit by an extraordinarily poor year in terms of the number and magnitude of catastrophes.

Last year Duff & Phelps Credit Rating Co. (DCR) lowered the claims paying ability rating of the reinsurance subsidiaries of New Cap. New Cap Reinsurance Corporation (Bermuda) Ltd. and New Cap Reinsurance Corp. Ltd. (Australia) were lowered to `BBB' (Triple-B-Plus) from `A' (Single-A).

Poor underwriting results were cited as a major factor and an 11 percent reduction in shareholders' equity from year-end 1997 levels. New Cap Re was formed to provide additional international reinsurance capacity in the Australian market sector. A primary source of premium for the company is large brokers with offices in Australia.

DCR said the company faced considerable challenges in improving operating profitability and developing a viable reinsurance franchise over the longer term, given an extended soft reinsurance pricing environment, and continued trends of consolidation in the reinsurance market.

New Cap Re was incorporated in Bermuda in August 1996 and has shares traded on the Australian Stock Exchange. New Cap Re was developed by Volker de Chelard, former underwriter of GIO Re in Australia, along with Paul Williams, a Chicago-based reinsurance intermediary, and Jonathan Beach, a Toronto-based insurance entrepreneur.

Shares in the company ware trading at about 48 cents yesterday.

Kymn Astwood