Ariel Re is the latest Bermuda reinsurer to jump into the Lloyd's of London market, announcing it has reached an agreement to buy Atrium Underwriting for $396 million ($193.2m).

Don Kramer, president and CEO of the "Class of 2005" start-up, is adamant the move is less about any perceived pressure for Bermuda companies to diversify beyond traditional catastrophe lines, than it is fulfilling a early stated intention of Ariel Holdings to be a diversified operation.

No stranger to success in the reinsurance market, Mr. Kramer has previously headed NAC Re (sold to XL for $1bn) and Tempest Re (merged with Ace).

As he pointed out in a recent interview, Ariel Re, like the rest of the Class of 2005, has not been stress-tested because of the benign catastrophe season in 2006 and the so-far quiet 2007.

Speaking to The Royal Gazette following some 24-hour days working on the Atrium move, Mr. Kramer said he was under no illusion that sooner or later "something will happen" to test the strength of Ariel and the other 2005 start-ups.

"Something is going to happen. I presume we will see something. You have to run a company with the view that something is going to happen," he said.

But in the meantime the company is moving ahead with its original stated mission to diversify business beyond reinsurance.

That manifested late last week in an announcement that Ariel is to tap into the Lloyd's of London insurance market by buying Atrium Underwriting through an offer of $3.65 a share. Last Friday as the news broke shares of Atrium surged 16 percent to $3.60, valuing Atrium at $188m ($386.6m)

More than 30 percent of Atrium's shareholders, and the company's board, have agreed the take-over according to Ariel. Last year Atrium almost quadrupled its profits to $32.2 million ($66.2m) after natural-disaster claims fell.

With many Bermuda insurers and reinsurers awash with cash as a result of the benign 2006, there is a strengthening opinion that the Island's companies need to look for new opportunities.

Eamonn Flanagan, an analyst with Shore Capital in Liverpool, said: "The Bermudians are under huge pressure from the rating agencies to diversify, increase their capital base or reduce their underwriting."

He added that other Lloyd's insurers including Chaucer Holdings Plc, Hardy Underwriting Plc and Kiln Plc may be attractive targets for Bermuda-based companies.

A Bloomberg report also noted that the intended acquisition comes as Bermuda companies look to diversify beyond traditional catastrophe reinsurance. Lloyd's insurers including Hiscox Ltd. and Kiln Ltd. plan to reduce the amount of business they insure next year amid falling rates across most insurance lines, including catastrophe coverage.

The Ariel move further strengthens the Bermuda-London link. Hiscox, Omega Underwriting and the biggest Lloyd's insurer of all, Catlin Group, have all shifted business interest to Bermuda from London in the past 18 months. Amlin Plc has set up a subsidiary and Brit Insurance Holdings is to be lead investor in catastrophe reinsurer Norton Re, and in March Kiln announced it was moving its headquarters to the Island.

Ariel CEO Mr. Kramer told The Royal Gazette: "London is going through a flowering period. For Bermuda insurers Lloyds offers a unique platform. We are moving in that direction. So many have come to Bermuda it is already a well established trend."

He described the deal as "very attractive" and something Ariel had been planning to do as an operation.

"Atrium gets us in the direction we want to go."

And he said there should be no impact on jobs as a result of the take-over because Ariel's focus is primarily property and marine and reinsurance, while Atrium has a diverse book of London business.

"There is no overlap. We are not duplicating what we do," he said.

In a conference call last week Mr. Kramer also said the move into the Lloyd's market "brings credibility and financial stability" to Ariel.

Ariel now owns a significant stake of Atrium. The take-over is scheduled to close this year, and Atrium shares will be removed from trading in London.

Closely held Ariel's backers include buyout investors Blackstone Group LP and TPG Inc.

Hawkpoint and HSBC Holdings Plc backed Ariel's bid. Noble & Co. and Lexicon Partners advised Atrium.

AM Best has placed its "bbb+" issuer credit rating on Atrium Underwriting under review with "negative implications."

The agency said: "The rating will remain under review while AM Best assesses the impact of the transaction on Atrium's risk-adjusted capitalisation and its strategy at Lloyd's of London."