While the financial guaranty market is not likely to see new entrants, competition is likely to come in the form of greater participation by the primary insurers, according to Joy Richardson, president and chief executive officer of RAM Re.

RAM Re is a financial guaranty reinsurance company based in Bermuda, which recently had its AAA-rating affirmed by Standard & Poor's.

"The market for financial guaranty insurance continues to grow each year and we expect 2003 to be as strong as 2002," Ms Richardson said. "That bodes well for reinsurers, as well as for primary monoline financial guaranty companies."

Primary insurers reinsure transactions "to shape their portfolio, to manage single risk limits and to obtain capital relief," Ms Richardson said. "The higher the rating of a reinsurer, the more capital relief a primary insurer receives.

"RAM Re's triple-A rating from Standard and Poor's makes it possible to provide the higher capital relief at 100 percent to all of our customers."

If the primary insurers are retaining a higher share of the risk, the possibility of new companies entering the reinsurance market is presumably reduced.

"While we haven't heard about any new companies being set up in our market, it's always possible," Ms Richardson said. "Instead, we expect increased competition to come from our customers, the primaries, as they reinsure more of their business among themselves.

"However, this may only absorb the reduced reinsurance capacity with the recent downgrading of some of our competitors."

RAM Re has recently raised a third round of capital funding that totalled $91.6 million. The additional capital resulted in the affirmation of RAM Re's triple-A rating, and changed the company's outlook to stable from negative.

Participants in the capital funding were The PMI Group, Inc. Transatlantic Reinsurance Company, CIVC Partners, L.P., and MBIA Insurance Corporation.

MBIA, a new shareholder and key customer of RAM Re, is the largest triple-A rated monoline financial guaranty insurance company.

"Now that our rating has been affirmed and we are less capital constrained, we can begin to take advantage of the changes that have taken place in our market and become a more important reinsurer to our customers," said Ms Richardson. "We will continue to capitalise on our core strengths, which include excellent customer relationships, a strong financial position, and our Bermuda domicile."

RAM Re was formed in February, 1998 to take advantage of an increased emphasis on diversity of reinsurance sources by the "AAA/Aaa" rated financial guaranty primary insurers.

The company has strong relationships with each of the four largest primaries and is developing relationships with the newer entrants in this market.

Other investors include: GSC Partners, High Ridge Capital Partners L.P., Canaan Equity, L.P., Western General Insurance Company, and the Bank of Bermuda.