The use of offshore captives is expected to increase worldwide in 2001 due to Bermuda's segregated account legislation, according to a top risk manager.

Hugh Rosenbaum, a former consultant at management consultants Towers Perrin, made the prediction at the 10th Annual World Captive and Alternative Risk Financing Forum in Palm Beach Gardens, Florida, while speaking on captive applications for funding property casualty and employee benefit risks.

Segregated account companies are like rent-a-captives since both provide non-owned captive insurance services.

"The high turnout at this conference, together with the reported higher insurance rates, are indications that captive activity will be on the increase in 2001,'' said Mr. Rosenbaum.

"And since the large established captive-owner market seems to be stabilised in the US, the growth will be coming from newer entities and second-tier companies where representatives also are expressing an interest in finding better ways for pre-funding employee benefits.'' He said segregated account companies had been forming offshore in Guernsey and Cayman and attracting hundreds of new captive-like accounts.

"Now that Guernsey and Cayman have been joined by Bermuda, where classic rent-a-captives have been operating a long time, I think the era of the non-owned captive insurance company service has come into its own,'' Mr.

Rosenbaum said at the conference.

The presentation at the World Captive and Alternative Risk Financing Forum was one of a number on captives and their formation. There were also sessions on new risk in health care and ways to use advanced financing techniques for captives.

Sessions were also held on group captives, employee benefits and pensions. The conference was co-sponsored by Business Insurance, Skandia International Risk Management and Tillinghast Tower Perrin.