reports, some people disagree this is the best method of revealing quality.

PartnerRe CEO Herbert Haag is one of them.

Bermuda-based property catastrophe reinsurer, PartnerRe, is the world's fifth largest reinsurer by equity, and the firm's president and CEO, Herbert Haag, said there is a "strong argument'' for ranking reinsurers that way, rather than by premium volume.

Writing in the firm's quarterly newsletter, Mr. Haag, also weighed in on an issue up for debate last week in the annual reinsurance conference in Monte Carlo, Rendezvous des Septembres.

The question before delegates was: Is leadership in insurance more a matter of competence than capital? Mr. Haag's view is that the question already assumes that leadership is not a question of volume.

He said, "Reinsurance purchasers are tending toward buying less cover against high frequency threats with lower severity, preferring to manage them in-house. The high severity threat in all lines is becoming the critical element of an insurer's reinsurance strategy and it is here that both capital and competence are key.

"We believe that reinsurers will increasingly be called upon to demonstrate the adequacy of their capital measured against the risks exposing it -- as PartnerRe has done since its formation.

"And capital without competence is easily wasted!'' Mr. Haag questioned the ranking of financial services companies by turnover.

He said that while reinsurers are regularly ranked by premium income "every insurer knows that quality is not revealed by a top line premium figure.'' He added, "Reinsurance premium income is made up of vastly different types of premium, each one not simply comparable to the other. Still, insurance analysts, industry publications and, not least, reinsurers themselves are emphasising size measured by premium income.'' He said top line developments seem to get more attention than results and that's why it is not surprising that reinsurers are eager to "maintain or grow volume, often at the expense of quality, for fear of losing market position.'' "Equally,'' he continued, "the elimination of unneeded quota-share reinsurance or the transformation into more efficient non-proportional protection is resisted by a reinsurer for volume reasons often against the interest of its clients. This is a pity.'' Mr. Haag advocated that at a time when excessive competition is driving prices down, there is a need for responsible leadership.

He does not expect reinsurers to change their focus from top line growth, when too little importance is given to capital strength and profitability. But a ranking by equity, rather than by premium, he said, would alter underwriting decisions and benefit the industry, thanks to higher profit margins, higher premium retention and improved reinsurance security.

Meanwhile, the company newsletter disclosed that the firm put an additional $55 million into an "appropriated retained earnings'' fund during the first six months of the year.

The money, which totaled $291.9 million by the end of June, was discussed by the company in its Form 10-Q filed with the US Securities and Exchange Commission.

PartnerRe said that under US GAAP (generally accepted accounting principles), it is not permissible to establish general catastrophe reserves to the extent that catastrophe losses have not been incurred.

"However,'' the statement continued, "the company believes it is prudent to anticipate future catastrophe losses and therefore appropriates a portion of retained earnings for that purpose.'' Herbert Haag