Bermuda insurer the Argus Group has predicted that local property insurers will soon feel the impact of the September 11 terrorism attacks and as a consequence, the cost of household and business insurance can be expected to increase.

This is according to Gerald Simons, the president and chief executive officer of the Argus Group in his letter to shareholders yesterday, warned that the company would be fortunate to match the profits made in last year's first six months when they release figures next month.

He added that he believed the number of people covered by employee benefit plans will fall slightly as companies are hit by the fall-out from the September 11 attacks.

He said: "Businesses and households can expect premiums for general insurance classes, particularly property, to increase as insurers and reinsurers re-evaluate the price they are willing to accept for the risks they assume."

It has been predicted that the international re/insurers, who are not allowed to do business with local companies would be impacted by the catastrophes in America, but this is the first time a local insurer has predicted a downturn in business.

He also said that the attacks have already had an impact on Bermuda with redundancies, layoffs and reduced working hours in the hospitality industry as well as insurers and reinsurers facing massive claims.

Mr. Simons said: "All of us at Argus were saddened by the tragic events in the United States on September 11, 2001. Our hearts go out to the families and friends of the thousands of victims of the attacks by terrorists."

And he added that the beginning of the attacks on Afghanistan has added to the sense of uncertainty. He said: "Clearly the world of business and our everyday lives have changed."

He said: "The events in America have already had an impact in Bermuda. Redundancies, layoffs and reduced working hours in the hospitality industry have been announced. Bermuda's international insurance and reinsurance companies are undergoing their greatest test as they face massive claims.

"At Argus we expect that the number of people covered under our employee benefits plans to fall slightly over the coming months."

And he said while property insurers were fortunate no losses were sustained when hurricane Errin passed by Bermuda in early September, he said: "They are are certain to feel the impact of the catastrophes in America.

"Insurance rates, prompted by higher reinsurance costs, were already beginning to harden prior to September. The recent events will cause reinsurance rates to rise even further and could result in a lack of reinsurance capacity."

But he added that the life insurance portfolio, which includes Argus' private placement variable life insurance policies, is supported by highly rated international reinsurers who have the financial strength and resources to meet their obligations and said all their reinsurers have publicly declared their ability to handle claims arising from the September 11 tragedy. He added: "We therefore do not expect problems in this area."

Mr. Simons said: "Next month we will announce the results for the six months ended September 30, 2001. We would be fortunate to match the performance of the corresponding period last year in light of several reductions in interest rates during the year and the recent decline in the market value of our local and international equity investments. Argus remains, however, a very strong company."

The company, which is traded on the Bermuda Stock Exchange, raised the shareholder's dividend from 21 cents to 22 cents per share to shareholders of record on September 28, 2001.