The Bermuda Insurance Index Fund (BIIF) has undergone substantial changes reflecting the new risk landscape formed on the Island following September 11.

Troubled Mutual Risk Management (MRM) which was one of the constituent companies has been axed, as well as Stirling Cooke Brown and PXRE.

Speaking with The Royal Gazette yesterday, fund administrator Anne Kast said a whole host of changes had been made to the fund that will take effect from April 30.

These include the purchase by Kast Investment Management Ltd. (Kast) of MRM's 6000 founder shares of the company, as the fund was co-managed by MRM and Kast. Kast Investment is now the sole manager of BIIF.

Ms Kast said president and CEO of MRM, Robert Mulderig's three year contribution to the fund will be missed, but said MRM will remain as the fund's sponsoring broker for listing on the Bermuda Stock Exchange (BSX).

Also new, the Fund's administrator has been changed from Hemisphere Management to Meridian Corporate Services Ltd.

The directors have also been changed, with Tom Healy of Hemisphere Management replaced by Sean Davis of Meridian Corporate Services Ltd.

Auditors Ernst & Young have also been replaced by Mazars Neville Russell in an effort to reduce fees.

Ms Kast also said that in order to lower costs to the investors, they are "unbundling fees" so that the management fee is reduced from two percent to one percent and all other costs are debited to the fund rather than being taken from the higher management fee.

Also new is the withdrawing of income shares, and only accumulation shares will now be offered which is expected to lead to a reduction in annual listing charges.

Several of the constituent companies no longer meet the inclusion criteria due to the decline in their market price, and these companies, which include MRM, Stirling Cooke Brown and PXRE, will be temporarily suspended from the index list until such time their market capitalisation recovers to at least $100 million or one percent of the index. These removals are expected to help reduce brokerage fees said Ms Kast.

No companies will be added to the Index however as Ms Kast says she does not know of any other company's meeting the criteria to be listed in the index, namely that the company has global headquarters and senior management in Bermuda, that the company trade on the BSX and a major overseas Stock Exchange such as the New York Stock Exchange or Nasdaq.

"For the time being we will be operating with fewer companies," said Ms Kast who added: "We have been working very hard to reduce the fees on this fund."

However, the new companies formed in Bermuda following September 11 provide exciting prospects says Ms Kast who said that in future, it was hoped to add new and exciting attractive companys to the list.

As far as existing shareholders, Ms Kast said: "Hopefully efforts to reduce cost will go right to them, the primary beneficiaries. If we reduce costs, the performance goes up, this is the primary driver behind many of the changes, to reduce costs.

"This is a fast changing world, so this is an opportunity for investors as we are reducing costs under the full management of Kast we hope to continue with efforts to introduce shareholder value whenever possible."

Starting at $10 in 1998, the fund currently trades at $12.629 which is a 26.30 percent increase net of all fees compared to a 25.48 percent return for the S&P 500.

"It's been a very good investment especially in a bear market," said Ms Kast. She also said that the bear market lasted through 1999, while the market improved in 2000 and 2001, and that 2002 was shaping up to be a good year for insurers.

Ms Kast is still bullish on the sector: "A lot of factors blend together well that are creating good outlooks for these companys."

Minimum investment in the fund is $2,500.