Insurance incorporations on the Island fell off in July by more than 30 percent in comparison to the rate of new companies setting up a year ago.

Broken down in terms of actual company numbers, data released this week by the Insurance Division of the Bermuda Monetary Authority (BMA) showed that only four new insurance entities registered to do business on the Island compared to six in July, 2002.

Of the four ventures to incorporate last month, two of the four were classified as class one insurers, or single-parent captive companies, with minimum capital and surplus requirements of $120,000. In addition, one category three insurer was registered to write as a third party carrier and one long-term life or pension insurer was approved to write business in July, each with minimum capital and surplus requirements of $1 million and $250,000 respectively.

No class four insurers - the highly capitalised companies licensed to write either direct excess liability and/or P&C re/insurance - were licensed to write business in the Bermuda market during the month.

In comparison, during the same period of 2002, there were three class one single-parent captive insurers, one class two multi-parent captive and two class three third party carriers set up to do business on the Island.

July's lower numbers follow a healthy number of incorporations during previous months - the second quarter saw 25 insurance ventures set up in comparison to 19 in the same period a year ago - with Bermuda insurance regulators at the BMA citing a renewed interest in captive companies as being behind the strong number of companies seeking licences to write business here.

Captive companies - entities set up to insure their owners - in Bermuda date back to the 1960s and were the original backbone of the Island's insurance sector. Today captives remain an integral part of the Bermuda market with two-thirds of the island's insurance companies falling into this category.

GLOSSARY

CLASS 1: A single parent captive insurance company owned by one or more affiliates of a group and underwriting only the risks of the owners of the insurance company and affiliates of the owners. Class 1 insurers are required to maintain minimum capital and surplus of $120,000.

CLASS 2: Multi-owner captives which are defined as insurance companies owned by two or more unrelated persons provided that the captive underwrites only the risks of the owners and affiliates of the owners and/or risks related to or arising out of the business or operations of the owners and affiliates. A Class 2 license will also apply to single parent and multi-owner captives writing no more than 20 percent of net premiums from risks which are not related to or arising out of the business or operations of their owners and affiliates. Class 2 insurers are required to maintain minimum capital and surplus of $250,000.

CLASS 3: Applies to insurers and reinsurers not included in Class 1, 2, or 4. This includes finite reinsurers; reinsurers writing third party business; insurers writing direct policies with third party individuals; and, single-parent, group, association, agency or joint venture captives where more than 20 percent of net premiums written is from risks which are unrelated to the business of the owners. Class 3 insurers are required to maintain minimum capital and surplus of $1 million.

CLASS 4: Insurers and reinsurers underwriting direct excess liability insurance and/or property catastrophe reinsurance risks. Class 4 insurers are required to maintain minimum capital and surplus of $100 million.

Long-Term: Life and pension writers with minimum capital and surplus requirements of $250,000

•Source: Bermuda Insurance Institute