Company president John Stites is confident the new insurer will play a significant role in the Island A diversified financial services firm in the throes of a $70-billion merger has just formed a new Bermuda insurer.

Travelers Property Casualty Corp. said yesterday wholly-owned subsidiary Travelers (Bermuda) Ltd. will participate in the local insurance/reinsurance market as a Class 3 company.

Travelers Property is an 83 percent-owned subsidiary of Travelers Group Inc., the Connecticut-based conglomerate which is in agreement to merge with Citicorp in one of the biggest mergers of the year.

Travelers Bermuda has initial capital of $10 million and capacity up to $50 million, and will have a management company, Mutual Risk Captive Group, Ltd., a Mutual Risk Management Ltd. (MRM) subsidiary.

It will offer specialised coverages such as punitive damages, loss portfolio transfers, contractual liability coverages and miscellaneous bonds, as well as excess and professional liability.

The company will extend existing relationships within the Travelers family with large multi-national firms, providing important, but fringe coverages initially in Bermuda.

But executives expect that they would soon see a flow of submissions that would represent new customer relationships.

The company will operate out of the Church Street offices of MRM, with John B.

Stites (formerly of Chubb Atlantic Indemnity) as president.

Mr. Stites said yesterday from his Connecticut office, "The beauty of the Bermuda market place is that there is always more being vetted in Bermuda than one might expect.'' He will spend time shuttling back and forth between Connecticut and Bermuda during the early days of the company.

But reflecting on his previous tenure on the Island, he commented: "Our presence in Bermuda makes it possible to provide clients a variety of risk management solutions, particularly given our connection with Salomon Smith Barney and the other companies that make up the Travelers Group.

"This capability is especially important at a time when we are seeing an increasing convergence of insurance and financial products.'' He added, "We are enthusiastic about our entry into the Bermuda market and look forward to becoming a significant player. The products of Travelers (Bermuda) Ltd. will complement existing customer offerings and relationships, although we expect to develop new relationships as well.'' Chairman of Mutual Risk Captive Group Ltd. Simon Scupham said, "Our appointment by Travelers (Bermuda) Ltd. reaffirms our company's 20 year commitment to providing superior management services to sophisticated clients seeking innovative alternative risk financing solutions.'' Mr. Stites was overseeing the Chubb Atlantic Indemnity operation in Bermuda for some time before he moved to Denver to manage Chubb's territory in that region. But he left the Chubb Corporation in April and joined Travelers.

Yesterday he conceded he was pleased to be back involved in the business of large risks.

Travelers Group has had a couple of captives in Bermuda in the past, one of which -- a former Salomon Brothers entity -- has now been converted into the new Travelers Bermuda vehicle.

The Class 1 single parent captive, SP Insurance Co. Ltd., has been recapitalised and turned into the Class 3 Travelers Property Casualty-owned underwriting subsidiary, Travelers (Bermuda) Ltd.

SP Insurance was set up to effectively front some first party property and ocean cargo coverage for Salomon, but was relatively inactive in recent months.

Mr. Stites stated, "Mutual Risk Management will be an important liaison on the underwriting side. But we will be shuttling people on and off the Island to serve the submission activity.

"We will not have full-time resident underwriters on the island immediately, but certainly that will be our expectation longer term.

"The $50 million in capacity is reflective of our strong treaty support and the strength of the Travelers family behind us.

"We see ourselves in a year's time, staffing locally, bringing Travelers underwriters on to the Island, increasing our capital. And I would be disappointed if we are not a Class 4 company in a couple of years.'' The company is already studying a few transactions and expects to have business in place before the end of the month. But company officials are hoping that after early September, they will be able to meet with local brokers and begin their marketing campaign.