Hiscox Plc, which last year established a Bermuda subsidiary, is now in talks with investors to create a Bermuda-based reinsurer to provide coverage for its Syndicate 33 unit at Lloyd?s.

Hiscox wouldn?t be an investor in the new reinsurer, which may accept a portion of Syndicate 33?s premiums in 2007 and 2008, the company said last week. It will be capitalised with a mixture of debt and equity.

Hiscox said it was making the move to take advantage of expected underwriting conditions. Generally speaking, insurance premiums for catastrophe reinsurance have been rising in the US as a result of the disastrous 2005 hurricane season.

At the same time, many reinsurers have been establishing so-called sidecar reinsurance companies to take up some of the risks they are underwriting, usually on a quota share basis. Hedge funds have been particularly interested in investing in reinsurance, although there was no indication on Friday about who the investors were.

Hiscox manages Syndicate 33 and has a 72.5 percent participation in it.

Hiscox said that if the reinsurance transaction is not structured as a Lloyd?s Qualifying Quota Share, then it is likely that Hiscox Syndicate 33 will pre-empt its 2006 capacity of ?833 million by up to ten percent for the 2007 year of account.

Hiscox said earlier this year it was maintaining its capacity for 2007 at the same level as 2006. In 2005, the company deliberately scaled its capacity back as a result of poor underwriting conditions. In a forecast on 2007 underwriting Hiscox added that a final plan would be submitted to Lloyd?s in late September ?which may involve a change to Syndicate capacity depending on loss activity over the next three months?.