Developments in Bermuda's insurance industry may produce an imbalance in the economy according to Roger Davidson, president and director of Bermuda Press (Holdings) Ltd., which owns The Royal Gazette and the Stationery Store.

Mr. Davidson, who is also president of H.A. & E. Smith, said in the Bermuda Press' annual report that the Island's short-term future may severely test the mettle of the Government. Mr. Davidson also said that the good financial health which Bermuda enjoyed in the 1990 was being replaced by the "harsh realities of recession".

He warned that while the developments in the Island's insurance and reinsurance sector were encouraging, the economy may not be "well positioned to cope with the cold economic winds blowing on tourism" after having come to depend on the twin economic pillars of tourism and international business.

He added: "Bermuda's short term future may severely test the mettle of its Government. Demands for leadership and economic assistance will likely proliferate."

He urged Government to focus on the needs of local business and push down import duties in a move which he claims will help local commercial printing and publishing industry. Mr. Davidson said: "For the local economy, the greatest adverse impact is being felt in the hospitality industry and the retail trade. In any economy, and especially one as small as Bermuda's, everyone's fortunes rise and fall together.

"The cycle of relatively good financial health that Bermuda has enjoyed since the middle of the 1990s is now being replaced by the harsh realities of recession.

"Developments in the Island's insurance and reinsurance sector are encouraging, but may produce imbalance in an economy not well positioned to cope with the cold economic winds blowing on tourism."

He added: "Bermuda has He added: "Bermuda has grown accustomed to the synergies available from the twin pillars of tourism and international business on which its success was built."

Mr. Davidson said the company recorded an increase in profits of nearly 14 percent "against the odds" with profits rising from $1.92 million in 2000 to $2.18 million in 200. But Bermuda Press' expenses rose and net income from operations fell, and income was made up from diversifying the business into property. Mr. Davidson added: "In these difficult times the company will continue to look for and secure opportunities to diversify in our continuing quest to provide good returns to investors.

"If the downturn in the Bermuda economy becomes a deep recession, the challenge for all companies will be to maintain investment in staff and production processes, while earning meaningful returns for the company's future and its shareholders. We believe that the company is well positioned to meet this challenge."