A fifth new insurance company is to set up shop in Bermuda in order to take advantage of the high prices and gaps in insurance cover left in the wake of the terrorist bombings.

This takes the amount of combined targeted capital for the new businesses on the Island since the September 11 attacks to $4.5 billion.

The latest insurer on the block is to be set up by Bermuda-based White Mountains Insurance Group Ltd., which announced on Friday it was "seeking to establish a new Bermuda-based property and casualty reinsurer to respond to the current favourable underwriting and pricing environment in the insurance and reinsurance industry".

The company, which intends to focus initially on property business through the broker market, has a targeted capital of $1 billion, and White Mountain said it was to invest at least $200 million in the venture.

Jack Byrne will become chairman of the company. Mr. Byrne is currently chairman of White Mountains and chairman of OneBeacon Insurance Group, a subsidiary of White Mountain.

Mr. Byrne has good credentials for the job - he was chairman and CEO of GEICO and Fireman's Fund Corporation.

Anthony Taylor, formerly deputy chairman of Wellington Holdings plc, a publicly traded Lloyd's underwriting vehicle, will become CEO and chief underwriting officer of the company as of 1 January, 2002.

Mr. Byrne said: "We are pleased to be supporting the launch of this new venture. Led by Tony and my associates, I believe we have assembled a high quality team to establish the company at a time of significant opportunity in the global reinsurance markets."

Mr. Taylor said: "The company will be a customer focused reinsurer providing solutions and support in the world wide insurance and reinsurance marketplace."

Bank of America Securities LLC and Benfield Advisory Limited, part of the Benfield Group plc, are acting as financial advisers to the company.

This latest move follows reports last week that a new mega-insurance venture was about to be set up believed to rival ACE and XL in size.

The company, which has not been named, is said to be a joint venture between US insurance giants American International Group Inc, Chubb Corp and Goldman Sachs Group Inc and it is believed will employ some 200 people on the Island and is said to have capital of more than $1 billion.

Sources close to the companies said it was going to be a huge property and casualty business and an operation with possibly 200 or more employees and are expected to attract top ranking insurance executives from around the world.

Earlier in the month Arch Capital Group Ltd. said it was going to set up Arch Reinsurance backed by two private equity firms, Warburg Pincus and Hellman & Friedman, which would invest a total of $750 million in shares and warrants in Arch Capital. The new venture currently has about $500 million in capital, but has a target of $1 billion.

RenaissanceRe Holdings Ltd. is also setting up a new venture called DaVinci Reinsurance Ltd. with $500 million backing from investors, including State Farm, the largest US insurer.

And Insurance broker Marsh & McLennan Cos. Inc. has also set up new firm, Bermuda-based Axis Specialty Ltd., to offer property, aviation, war and other insurance with $1 billion in capital hoped to be raised.

Aon Corp. has also added some property and reinsurance lines to its own underwriting unit, Combined Specialty Corp.

Robert Hartwig, Chief Economist at the Insurance Information Institute in Washington DC, said: "Bermuda is going to play a key role in filling the coverage gaps we are going to find following September 11," he said. "It is a very successful time for Bermuda and its insurance industry."

The latest investment in the Bermuda insurance industry comes after the terrorist attacks opened up new markets, increased demand and seen rates rise. September's terrorist attacks may cost the industry as much as $70 billion, making it the largest insured loss ever. It has pinched the supply of insurance and insurance companies have raised their prices by between 30 and 60 percent in most lines. The new businesses would enable the US companies to expand their reinsurance operations. The Royal Gazette understands that the three companies will invest about $500 million to form the business.

The new wave of Bermuda firms are part of the third wave of insurance capital heading to Bermuda in the past 20 years.

In the mid-1980s ACE Ltd.and XL Capital Ltd. were set up by Marsh and other US investors to provide big-ticket liability insurance as large court awards dried up coverage in the US.

In the early 1990s, six major reinsurers were set up to soak up demand for large-scale property catastrophe reinsurance after Hurricane Andrew. Those reinsurers included RenaissanceRe and PartnerRe.