When it comes to insurance markets, Hamilton, Bermuda, is now the capital capital ? and rival domiciles are feeling the heat.

"It's a fact. That is what has happened," industry veteran Michael Butt, chairman of Bermuda reinsurer Axis Capital, said in a telephone interview on Wednesday.

The development was 20 years in the making, and many people doubted the Island would ever achieve first-class stature as an insurance market. Today the market is backed by some $80 billion in capital and surplus. About half of that, and counting, is held by the Island's commercial insurance and reinsurance market.

"Bermuda's key to success now is its ability to quickly raise capital," said Andy Barile, a former Bermuda reinsurer who now offers consulting services to the industry from his California base. "Twenty-five years ago the London market looked down on Bermuda, calling it a second class market. Now it is something to be reckoned with."

Today some of the biggest Lloyd's of London companies not only recognise the Bermuda market, they're coming around to the view it is the place to be. London insurers Amlin Plc and Hiscox Plc both established Bermuda units in recent months, as part of the wave of ten new start-ups.

The development has made rival markets, particularly London, stand up and take notice. In a move that is being taken as a warning shot by some in the Bermuda market, Lloyd's announced a new three-year plan to cut costs, a measure designed to stem the flow of business to rival markets such as Bermuda.

The Island's major insurers, most listed on major stock exchanges, sell policies to some of the world's largest corporations offering loss protection for everything from hurricane damage to the remote possibility of an executive being kidnapped and made subject to ransom demands.

Bermuda's major insurers and reinsurers, in round figures, are capitalised with about $50 billion in capital, based on data from the Bermuda Monetary Authority, and taking into account recent incorporations.

In contrast, the Lloyd's of London market in November said it expected its 2006 capacity to be in the region of ?14.7 billion ($25.9 billion).

Mr. Barile, who was behind Bermuda's first public reinsurer, remembers when the Island's market was an obscure outpost for corporations interested in a fledgling product that allowed them to set up their own entities to control the risk of losses. "It has changed from a captive domicile to a highly-capitalised place to solve reinsurance capacity problems," he said.

Today, the Island still leads as a captive domicile, but along side it has sprouted a reinsurance market to rival the world's most established insurance markets ? London and New York.

As the Bermuda market has grown, so has its exposure to losses. And the past year was a poignant reminder of that. Several of the Island's leading lights saw their capital bases reduced by half or more from heavy storm losses.

In total the losses are set to wipe billions of dollars from balance sheets in 2005. On the other hand, capital injections, by estimates in the region of $19 billion, have more than made up the shortfall. The funds went to established insurers and reinsurers, as well as the wave of ten new companies.

Investors lined up to pump money into the sector in anticipation of higher policy pricing when 2006 contracts were renewed. The optimism, as is often the case in insurance circles, followed catastrophe. Last year it was the record losses sustained in the US from hurricanes Katrina, Rita and Wilma.

The speed with which Bermuda companies were able to tap capital markets, and draw interest from hedge funds and private equity investors earned it the moniker 'Global Super Highway' for raising capital.

"The speed and ease of the capital coming in and out of this jurisdiction is a marvel to the financial markets around the globe," said Jim Bryce, chief executive officer of Bermuda property-catastrophe reinsurer IPC Re.

"It is truly a testimony to Bermuda being the better 'mouse trap' for financial services, and especially for insurance and reinsurance."

Don Kramer, one of the reinsurance executives behind Ariel Reinsurance, one of the new reinsurers, had to turn investors away when he was raising $1 billion for the new venture.

The company is backed by investors including the Blackstone Group LP, Texas Pacific Group, Thomas H. Lee Partners, Oak Hill Capital Partners, Olympus Partners, affiliates of Bain Capital, SAB Capital and Eton Park Capital Management.

"We really attracted the best of the best in terms of private equity investors," Mr. Kramer said, in an earlier interview.

Mr. Kramer said Ariel was able to secure $1 billion in capital in the space of weeks.

In comparison, Mr. Kramer said it took him three months to raise the $500 million in initial capital for the property-catastrophe reinsurer, Tempest Re, that he formed more than a decade ago.

While Bermuda's insurance market has a twenty year history of attracting capital, Mr. Butt said the Island's market has now gained worldwide stature.

Mr. Butt, like Mr. Kramer and Mr. Bryce, is a veteran of the 'Class of 1993'.

In his case, he formed 1992 company Mid-Ocean Reinsurance, another in the wave of property-catastrophe reinsurers that entered the market in response to a void in capacity following Hurricane Andrew.

"1986 (with ACE and XL) was the test bed, and it worked. In 1992, it was tested again and that gave it credibility and again in 2001 and today," he said of the four successive billion dollar waves of capital that have flowed into the Bermuda market.

"Money walks with its feet," Mr. Butt says of the ease Bermuda now has in raising capital when insurance cycles turn favourable. Last quarter, Island figurehead companies ? ACE Limited and XL Capital ? between them raised in the region of $4.5 billion.

To put that into perspective, that is more than double the total initial capital raised by the 'Class of 1993' companies.