The reinsurance market has been forever redefined by the events of September 11 and private equity players are now expressing interest in the industry in a bid to cash in on rising premiums.

An article in the UK Sunday Times last week entitled: "Fat insurance premiums lure equity giants", highlighted the new role of private equity players in reinsurance and examined some of the developments in Bermuda to capitalise on increased premiums stemming from the terrorist attacks on America.

The article said that companies such as JP Morgan and Goldman Sachs were in talks with brokers to enter the reinsurance market and while the industry was faced with a record pay-out after the attacks, the insurance sector is preparing itself for a four fold premium increase.

Premiums from aviation cover alone are expected to climb next year from $1.5 billion to $4 billion.

One insurer told the Sunday Times that "there was a deep shortage in capacity which he could not see being filled for several years, but companies needed to strengthen their balance sheets to write more capacity".

As a result, some insurers may create off-balance sheet vehicles backed by private equity money, it said. The report said other insurers have taken a more direct approach to raising capital such as QBE, the Syndey-based insurer which has announced plans for a $665 million rights issue, and if the offer is fully taken up, QBE could write up to $9 billion in net earned premium income.

Some companies are already capitalising on niches created by the attacks such as Marsh and McLennan, who lost one of the hardest hit companies in terms of loss of human life following the attacks last month, has moved quickly to capitalise on the industry's capacity crunch and has raised $1 billion of capital for Axis Speciality, a new Bermuda based insurer.

Axis Speciality Ltd. will have capital of $1 billion and will provide insurance and reinsurance coverage for risk property, aviation, war and political risks.

The new company is expected to begin underwriting in the fourth quarter of this year.

RennaisanceRe also formed a new $500 million property catastrophe reinsurance company, DaVinci Reinsurance Limited, in the wake of the attacks. RennaisanceRe vice president of finance Martin Merritt told The Royal Gazette that the new company was being formed in response to changing market conditions and was expected to be writing business by November.

This month there were at least six shelf registrations at America's Securities and Exchange Commission from companies looking to raise capital for Bermuda based insurance companies.