Robert Childs, chief executive of Hiscox Plc?s new Bermuda reinsurer, says the unit has already achieved 50 percent of its 2006 sales target.

By the end of February, Hiscox Bermuda ? which officially opened its doors to business last December ? had commitments for $155 million in business, or 48 percent of its $325 million target for the year.

More than half of that was new reinsurance business ? a key target for the $500 million Bermuda reinsurer, with international reinsurance sales, including to US buyers, projected to account for 52 percent of 2006 business.

The balance of business is being ceded, or passed on, to the Bermuda unit from other parts of the Hiscox group: eight percent from Hiscox?s Lloyd?s syndicate 33 under a quota share agreement, and 27 percent is coverage of kidnap and ransom, and fine art risks.

?It is non-correlating on the whole: Kidnap and ransom doesn?t get hit by hurricanes,? said Mr. Childs.

Hiscox, one of Lloyd?s of London?s largest insurers, also sells policies in Europe and counts on the US for more than 40 percent of its business. A New York office was recently opened, another stage in stepping up business on this side of the Atlantic.

The diversification model, used across the group, is designed to extend Hiscox?s steady record of underwriting profitability. While Hiscox?s after-tax 2005 profit fell 22 percent to ?70.2 million, the result meant it beat out many others in the industry to turn a profit. It also managed to post an underwriting profit despite storm losses of $283.7 million.

The company?s combined ratio, a common industry measure of underwriting profitability, was 96 percent in 2005 compared to 92.6 percent a year earlier. This made it somewhat of an industry rarity with many other insurers losing money on their core operations because of record industry losses that could go as high as $80 billion.

Reinsurers limit exposure to claims exceeding premiums by splitting business between various types of contracts, and geographic areas. To help ensure the diversification model is solid, reinsurers rely on sophisticated modelling systems as part of determining which policies to write, and for how much.

?We use models and adapt them as appropriate; we are very well set up in that regard,? said Mr. Childs.

Two of Hiscox?s modellers used to work for the industry?s biggest modelling firm, RMS, and then set up their own company before being recruited into the company.

Post-Katrina, many are also stepping up the reinsurance they in turn buy to help spread the risk of loss. The Hiscox Group is no exception, saying it was boosting its reinsurance protection in 2006. But it isn?t in a rush to capitalise, at least not right now, on the increasing convergence between capital markets and the insurance sector.

Numerous reinsurers ? including both new and old Bermuda-based companies ? are now pursuing transactions that cater to the growing interest from capital markets investors. Hiscox has already tested its ability to participate in the cross-market transactions, and knows it can participate, but doesn?t have any plans to do so right now.

?We had a catastrophe bond. It was called St. Agatha ? the patron saint of catastrophes ? and managed through a special purpose vehicle here,? Mr. Childs said. The $33 million cat bond (in keeping with Hiscox?s Lloyd?s unit being syndicate number 33) was set up several years ago and has now lapsed.

?There were never any major claims against it so it wasn?t really tested.?

?We did it just so we could see if we could do it, and we have maintained the capability,? he said. Issuing the insurance-linked bonds can be time consuming and expensive, he said.

Mr. Childs signed up to spearhead the formation of the group?s new Bermuda unit. He had been running Hiscox?s UK operations since 1993 and thought it was time for a change. He continues to be the group?s head of underwriting and is also chairman of Hiscox USA.

Wearing that many hats, Mr. Childs has to divide his time. About 60 percent is spent in Bermuda, and the balance between the New York and UK operations.

?From a business point of view, I haven?t had so much fun in a long time,? he said of moving to the Island. ?It takes me 1.5 minutes to walk to work in the morning.?

He also likes being in charge of a small, specialised team ? and he?s impressed with the calibre of applicants on the Island (see separate story).

?We?ve got a small team, and we are all close. The underwriting team was transferred here, and we?ve recruited local staff.?

Hiscox was one of nine major insurers to join the Bermuda market late last year. Another six smaller reinsurers ? ?sidecars? in industry lingo ? also formed or are forming. These smaller ventures are being established opportunistically to provide capacity to established players.

Mr. Childs makes it clear that Hiscox has made a long-term commitment by setting up its Bermuda unit. ?We?ve been talking (about coming to Bermuda) for a couple of years, and it was then a case of waiting for the opportunity.? And he praises the Island for being ?a living, breathing financial community?.

Hiscox isn?t the only Lloyd?s insurer to think Bermuda is the place to be (see separate story).

Chairman Robert Hiscox, in a statement issued earlier in the month with the company?s 2005 earnings report, said Bermuda ?resembles the Lloyd?s of old in its entrepreneurial spirit, speed of reaction and swift and sensible regulation?.

Mr. Childs said Bermuda is a market you have to be in if you are selling reinsurance.

Last year, Mr. Hiscox also raised the prospect that the company could shift its holding company to the Island.

?We have it minuted in a Plc board meeting that we should investigate it,? Mr. Childs said, indicating no final decision has been reached.

In the meantime, there is a new business to run, and Mr. Childs thinks Hiscox may have a few advantages over some of his peers that formed brand new operations in 2005.

?We have existing corporate relationships with the brokers and clients rather than just existing personal relationships,? he said. And the Bermuda company, as part of an established group, won?t be under the investor pressure bearing down on some others in the so-called ?Class of 2005? to make big returns for investors through a profitable IPO. Hiscox, a company more than 100 years old, trades on the London Stock Exchange.

Hiscox?s moving in to the Bermuda market ?is a development, not an investment strategy?, said Mr. Childs.