those in a buyer's market are still shaking their heads in disbelief. With so much capital vying for the same business in reinsurance markets in recent years -- and so much pressure on top line growth -- the success of Bermuda firms is remarkable.

The minimal losses incurred -- in some cases in single digits -- and the softening of rates have been balancing influences, while reinsurers, especially here, have been busy with diversification plans.

The `cat' business has been lucrative for reinsurers in recent years, in the absence of major catastrophe losses since Hurricane Andrew's $15.5-billion insured damage in 1992.

In 1997, Mid Ocean Re had net income of $180.4 million for the first nine months to July 31, while PartnerRe announced a profit of $187.3 million for the nine months to September 30.

For the year to 1997, LaSalle Re has declared a (before minority interest) net income at $121.5 million. CAT Ltd. posted six month to June 30 net income of $62.7 million.

RenaissanceRe in nine months to September 30 had a healthy $107.9 million in profit, while during the same period IPC Re had net income of $78.6 million.

And ACE Ltd. reported income, excluding net realised gains, from its subsidiary Tempest Re of $119.8 million.

Industry cycles relate to the ups and downs of pricing, but also to an average set up loss ratios. After five years of low loss ratios that have depressed pricing, many are waiting for the next large loss or series of losses.

Said president and CEO of Mid Ocean Re, Michael Butt, about the continuing absence of losses: "It will equalise itself at some point. We don't know when. We know it will happen. Meanwhile, Bermuda companies are showing the professionalism of underwriting discipline.'' He said, "Bermuda companies will survive the next major event, better than other markets. The capital management here is very conservative and so are the ratios of premium to capital.

"Certainly at Mid Ocean, and I can't vouch for all of the others but I do believe, that the aggregate management -- that's to say the exposure per catastrophic zone -- is very conservative.

"The companies here, at least those that I know of, are run on the basis of being around after the second "big one''. We want to be here, when everybody else turns out the lights.'' "Still,'' said Mr. Butt, "there are a lot of buyers out there who are not persuaded by our argument for quality and security of capital. Some still buy substantially on price. That is their business and I understand that, but they are not the kind of clients that we necessarily want to do business with.'' The European market, the Australian market and the American market are attuned to thinking in terms of the quality of the product, rather than just the price. The Latin American and East Asian markets reputedly have habits which are still largely driven by perceptions of price.

Reinsurers in the US, Europe and here primarily seek long term, quality relationships with clients. But Bermuda companies may be more driven by Anglo-American capitalism considerations of quarterly and annual results, than their continental European competitors.

Mr. Butt said that is because of tax issues and the US GAAP, with the accounting treatment for reinsurers here exactly the same as for US companies.

He said, "European reinsurers, for a range of understandable reasons, see their main responsibility to shareholders as the developing of the hidden assets of the company. That's driven substantially by tax, where shareholders can benefit more by having the assets grow inside the company, than by declarations of profits that were taxed in Germany, for instance, at 50 and 60 percent.'' While resisting the temptation to write technically unsound business, there is niche business being developed at Mid Ocean by top underwriters.

Mr. Butt said, "It will be slower growth as a result, because our prime function is to build the business, but make money for our shareholders.'' Coming through its fifth year, he expects the company to again deliver a percentage return in the high-teens on a very strong balance sheet and reserves.

He said, "There is no doubt that patience is required in running a reinsurance company, if you are going to run it sensibly through cycles, using the brake and the accelerator. Right now, it's a good time for the brake.

"That doesn't mean that you don't continue to invest in the future. We've opened an office in Singapore. We're building a staff there and client relationships there. We're doing the same thing in Europe. We're not seeking to disrupt an already very aggressive market in Germany. We want to build our relationships with a key group of potential clients. When they need us, we will be there at a price that is acceptable to us. That may take three or four years. It is a very long term business and relationships take time to develop.'' Meanwhile, the Mid Ocean Re executive believes the Bermuda marketplace has become accepted as a credible centre for reinsurance.

He reminded: "The reputation for integrity takes a long, long time to build but can disappear very quickly indeed.

"We always have to be on our guard to protect the perception and the reality of the integrity of the Island. Be it in the judicial process, political governance, political stability. They are very important issues for us to be able to continue to successfully do business around the world.

"Cooperation between the industry and Government on regulation is much better than most other places and I think that is one of the reasons why it works here.

"Regulation is an awful task because you always get blamed for things that go wrong, that have to go wrong because it is a marketplace. And you never get praised for when things go well. I think the regulatory system here works very well, given the relatively few resources that are available for it.

"I suspect that many have studied the successful model like this. It is called benchmarking. I'm sure that many will continue to seek to copy it.

There are certain things that are difficult to copy, like location. That is a very important part of the winning model here. You know, an hour and a half to New York, six hours to London. Well-rehearsed points.

"I see no threat to Bermuda's continuing development as a worldwide reinsurance centre, given the point I made about integrity.'' MICHAEL BUTT--President and CEO of Mid Ocean Re.