A new $500 million reinsurance company is being formed in Bermuda by RenaissanceRe in response to increased demand for insurance and reinsurance following the September 11 terrorist attacks.

RenaissanceRe vice president of finance Martin Merritt said market conditions - since September 11 - have changed and the new company is being formed in response to those market changes.

RenaissanceRe's new venture is called DaVinci Reinsurance Ltd. and will be a property catastrophe reinsurer.

This move follows an announcement from Marsh & McLennan last week that they are forming a new Bermuda-based insurance company - Axis Specialty Ltd. - in the wake of a capacity shortage following the September 11 attacks. Axis, with capital of $1 billion, will be providing insurance and reinsurance.

DaVinci Re is expected to be initially capitalised with $500 million, but RenaissanceRe reports that figure could grow depending on catastrophe reinsurance capacity demands.

Initial investments in DaVinci Re are expected to come from State Farm Mutual Automobile Insurance Company - with a $200 million capital contribution - and from Renaissance Re, with a $100 million capital contribution. The remaining $200 million is being sought from other sources.

Mr. Merritt said DaVinci should be up and running by November. RenaissanceRe is able to move quickly on forming DaVinci Re, he said, as it will use "people already on the ground", and existing office space.

Renaissance Re will now have three vehicles - Renaissance Re, OPCat, a Bermuda-based company reinsurer set up in 1999, and DaVinci Re. With a third company, Mr. Merritt said it will now be able to offer up to $200 million per programme - from three strong reinsurers - with over $2 billion in total capital.

RenaissanceRe CEO James Stanard said the formation of DaVinci Re further strengthens RenaissanceRe's position as a leader in its principal product; property catastrophe reinsurance.