Bermuda?s newest insurers ? the ?Class of 2001? ? have not yet been knocked off a solo course by softer market conditions despite predictions M&A activity could occur in tandem with a market downturn now underway.

Senior management at some of the Island?s biggest reinsurance and insurance companies participating in a ?View form the top? panel discussion at the Professional Liability Underwriting Society (PLUS) Symposium this week, said conditions were not right to foster mergers or buy-outs of the wave of major insurers formed in Bermuda following a void in capacity after the September 11, 2001 terrorist attacks. The continued independence of the so-called ?Class of 2001? companies ? AXIS Capital, Allied World Assurance Company (AWAC), Endurance Specialty, Montpelier Re, Platinum Underwriters and Aspen ? has proved wrong three years of speculation they might mirror the course set by the Island?s 1993 wave of property-catastrophe reinsurers. Five of those eight companies ? founded in response to a property catastrophe reinsurance crunch after 1992?s devastating Hurricane Andrew ? were in the years following sold off to rival companies. But three years on, none of the ?Class of 2001? companies have followed suit despite clear signs that softer market conditions ? when the price of insurance goes down and competition heats up ? have set in.

The 2001 companies, in contrast to their 1993 counterparts, are multi-line reinsurers and insurers as such they don?t fill a specific niche like the 1993 reinsurers did, industry observers say.

AXIS chairman Michael Butt ? who experienced the M&A activity a decade ago when his company Mid-Ocean Re was bought out by XL ? said the companies in the 2001 wave of start-ups, in contrast to the 1993 companies, were broader in scope than the single-minded property-catastrophe focus of the reinsurers more than a decade ago.

?There are different profiles which will make for a different economic dynamic in the M&A phase if and when it comes,? he said.

We may also see different shareholder pressures this time than last time. How that will work out is a little early to say. The investment community may have more to say, with a lot of the M&A activity last time being driven by management. But I see a very different evolution from [last] time around,? he predicted.

ACE Limited chairman Brian Duperreault ? with that company buying up two of the 1993 cat companies ? said because the 2001 don?t fill a specific niche, consolidation would need to be for economic rather than strategic reasons.

XL Capital CEO Brian O?Hara said: ?The world has changed. A lot of the people who might have capital to make acquisitions today may have already filled out there strategic dance card, if you will.?

Mr. Duperreault said ACE was initially concerned at the sudden filling out in the marketplace by the 2001 companies but now felt it made the Bermuda a better, more dynamic insurance centre.

He said the fact that all the 2001 continue to do may also have discouraged M&A activity. ?Usually consolidations occur when nothing else is working so it is more a testimony to the marketplace that they are all doing well, which is different to when the [previous] consolidations took place.?

Mr. O?Hara said a future deterioration of the market could change the course if reserves set aside for exposure to future claims were eroded. ?It is early days. All the start ups are doing very well, if not very well ? they have not hit a wall. It is not like they are desperate to do something else in life.

?I?ve always said it is more likely there would be mergers of the class of 2001 with complementary strengths, rather than outright acquisitions. At this time all in the ?Class of 2001? are doing fine on their own.?

More on the PLUS Symposium, Page 31