One of the Island's new wave of insurers to set up on the Island in the wake of the September 11 terrorist attacks is to be 60 percent larger than originally planned after the company's management recognised extra capacity for the business.

Axis Specialty Ltd., a insurer and reinsurer backed by Marsh and McLennan Ltd., had hoped to raise $1 billion in capital, but demand from both investors and businesses have led to it raising $1.6 billion in capital.

And Bob Newhouse, chairman of the new company who has a long history with insurance in Bermuda at ACE, XL and Mid Ocean, said it is now set up in the former Partner Re building on Pitts Bay Road and the former OPL site at the Mayflower building on Par-la-Ville.

He said it was ready to start writing business and could have more than 30 employees in a few years time if business goes well.

"It never occurred to me to go any place else when we were forming this company," Mr. Newhouse told The Royal Gazette yesterday.

"Bermuda has become, among other things, the real marketplace for the reinsurance captive. I would say it is number one. In along with London, it has become the international marketplace. People talk about tax advantages and regulatory advantages, but I think that is only part of it.

"The fact that you can get up and started and there is a record, people are comfortable as I am going back to ACE, XL and Mid Ocean, we are comfortable about being in business in Bermuda."

Axis Specialty Ltd. announced yesterday that it had been granted a licence to carry on business in Bermuda and that it would have about ten staff to begin with. Mr. Newhouse said: "We will have two office spaces with about 10,000 sq feet. From a staffing stand point we expect to have at least ten people - which we are almost approaching that now at inception, 20 people by the end of the first year, going up to 30 probably in the second and so forth." The company has raised more than $1.6 billion through a private placement of its equity securities and has been authorised in Bermuda under The Insurance Act of 1978 to underwrite specialty lines of insurance and reinsurance.

Axis Specialty, which is a global insurance and reinsurance company, was formed as part of the new wave of insurance companies in the wake of the World Trade Center disaster.

There are now six new companies with an targeted capital now of $6.3 billion together, with Axis with $1.6 raised and White Mountains' new venture Montpelier Re. When asked if he thought there was going to be a glut in the market in the wake of the boom, he said: "It depends how you count, some people are saying capacity will be $9 billion.

"The most important thing to do is to bear in mind is that while they talk about it as new capital, you have to think of it also in terms of the new capital that is replacing, It is not all in addition to. Some of it will be in addition to, but a lot of it is replacing the capital that has been lost for the business.

"I question people who say that the business is over-capitalised. I don't think any body knows if it is over-capitalised because they don't know the size of the World Trade loss, even as we speak people are increasing their estimates today. Nobody is sure just how much capital has been taken out of the business, much less what has to be replaced."

"Things are going very well in the sense that, as you know, we get our funding finished today and it's of a substantial size.

"When we originally announced a target it was $1 billion, we began to see the size of the displacement of the business, and the opportunities that would be created as a result of that and the fact that we had a great number of friends wanting to invest in the company. We then went to a target of $1.5 billion and closing out will be a little in excess of $1.6 billion.

"We see a bigger opportunity. As time went on we saw the dislocation in both the insurance and reinsurance markets which I think is one of the differentiations between us an others, we see an opportunity to play a big role in both reinsurance and insurance dislocation of capital."

The lead investor in AXIS Speciality is Trident II, L.P., a private equity fund managed by MMC Capital with other investors including Marsh and McLennan Companies, Inc., the parent company of MMC Capital, and private equity funds managed by J.P. Morgan Chase, Thomas H. Lee Partners, The Blackstone Group and Credit Suisse First Boston.

President John Charman and Mr. Newhouse lead the senior management team, which includes Andrew Cook, chief financial officer, William Fischer, chief reinsurance underwriter, and Conan Ward and Dave Wolfe, reinsurance underwriters. The company is also in process of recruiting a team of speciality insurance underwriters. This team will be headed by Mr. Charman and will commence underwriting in Bermuda in the first week of December.

The company's reinsurance business will focus on property catastrophe, property risk, aviation and aerospace, and marine. The company will develop a significant book of speciality insurance business focused on marine and energy, aviation and aerospace, war, commercial property and political risk.

Mr. Charman said "Axis is a truly transformational company for the speciality insurance industry. Our compelling combination of a substantial, unencumbered capital base aligned with a proven, strong and capable management and underwriting team will quickly position the company as a market leader.

"We are delighted to commence operations in Bermuda, and we look forward to becoming a major presence in reinsurance and speciality lines worldwide."