Bermuda is on the fast track to becoming the undisputed heavyweight of the reinsurance industry according to the chief executive officer of one of the new reinsurance companies planning to set up shop on the Island in the wake of the September 11 attacks on the US.

Tony Taylor, the CEO of Montpelier Re, has been a frequent visitor to Bermuda for the past 25 years and sat down with The Royal Gazette recently to talk about the new company he is spearheading and what can be expected of the insurance and reinsurance markets in the years to come.

Mr. Taylor said from 1998 to 2000 there were poor results in the whole reinsurance market stemming from very low rates and large losses which had initiated an increase in rates.

"So rates would have strengthed in any case, and then along comes September 11, which is definitely the largest monetary insured loss there has been in history," said Mr. Taylor. And he thought the loss could be in the region of $40 billion.

Reinsurance companies are expected to shoulder about 75 percent, or $30 billion of the losses.

This fact, combined with a number of insurance groups who wrote reinsurance as a sideline withdrawing from the reinsurance market means there will be a significant reduction of capital.

Mr. Taylor said capital was not only being raised in Bermuda (about $6 billion) and that if $10-15 billion dollars of new capital enters the market, "it's going to be needed."

When asked when the full extent of claims from September 11 would be realised, Mr. Taylor said: "I am afraid there will be litigation on this loss for probably the next ten or 15 years, and there already is a big issue as to whether the actual catastrophe was one or two separate events."

September 11 event was the only catastrophe which has impacted on virtually every class of business such as aviation, life, personal accident and workmens compensation, and Mr. Taylor said that general liability will undoubtedly find its way in there somewhere.

Those in the insurance and reinsurance world now have a different perception of risk says Mr. Taylor who said it was inconceivable that both World Trade Centre towers could have disappeared within 30 minutes of each other.

"So I think that insurers and reinsurers have to be looking at their exposures toady and saying, just how much could we loose from another event - not particularly terrorism - just another major event. And I think they are going to come up with a need to buy more insurance and reinsurance at a point when the supply of reinsurance from the market prior to September 11 had reduced quite significantly."

Initially Montpelier Re will write all forms of property reinsurance and some property insurance, and Mr Taylor said he sees the company building into other classes such as aviation and perhaps casualty business in the second and third year.

Many insurance policies will be up for renewal in January and many of the new companies are racing to set up before that time.

Mr. Taylor said: "It is hoped that we will have completed the formation of the company by December 10 with capital in place and at that stage we will need the final licensing by the Bermuda authorities. After that we will be able to commit lines on business."

Concerning Bermuda as a world centre for reinsurance Mr. Taylor said: "It is very significant. In the other big markets, London and the US, they obviously have a large volume of premium, but there are a number of operations coming out of reinsurance, and the new capital is basing itself here. I think the services here can provide what's required for reinsurance operations, and in terms of timing, where Bermuda lies fits reasonably well with London and the US."

Mr Taylor explains: "I certainly had a problem in London. I was chairman of a US company, and dealing with San Francisco, it was an eight hour time difference."

Mr. Taylor also pointed to a flexible regulatory environment as being conducive to establishing new operations in a reasonable time period whereas other jurisdictions can take longer, as well as tax benefits.

As far as getting a financial rating, Mr. Taylor said rating agencies don't generally give ratings to new companies until they have produced at least one set of figures but said: "Clearly we will go for a rating as soon as we can. But in terms of clients, I believe with a billion dollars of capital, which is "clean capital" (no back year liabilities), certainly in my old operation, I was heavily involved in the security committee, and I assure you we would accept the security of this new company in about two nanoseconds."

Mr. Taylor explained how he became involved in Montpelier Re saying: "About a week after the World Trade Centre event, I was in an executive meeting and I said to the other directors, you know we had better be careful because two weeks after Hurricane Andrew occured in 1992, I lost the deputy underwriter of my Syndicate, and then about a week later, I was approached to set up a new very large company."

Mr. Taylor recently left the Lloyds Wellington Syndicate 20/20 where he said he was not involved in day to day underwriting.

"I really wanted to get back into hands on underwriting, so this was a once in a lifetime opportunity, so I decided to pursue it," he said.

Mr. Taylor said he would like to build a firm base of a company: "I've done it before with my own syndicate in Lloyds, and I would like to become one of the accepted leaders, one of the main players in the market. That is what we achieved before and I am sure we can achieve again."

Three hectic weeks into setting up the company and space at the old Ace building on Pitts Bay Road has been set aside for the company's headquarters and employees taken onboard.

Montpelier Re is expecting to employ about ten people in the first year, one of which has already been hired and will be based in the U.K as a marketing manager. The company will also use a number of services provided by Bermuda operations.

White Mountains is the lead investor in Montpelier, providing $200 million of the $1 billion in capital, and White Mountains Chairman Jack Byrne will also be Chairman of Montpelier Re.

Mr. Taylor explains the Montpelier name: "We looked at two or three other names, but they were already in use somewhere. (However) we were flying over New England and we were looking for a name associated with White Mountains, and as we flew over Montpelier in Vermont, and I said, What about Montpelier?"

The rest was history.