pool of resources, writes David Fox . One service that could result is an internal audit for Bermuda insurers.

The largest accounting firm in the world is considering establishing an internal audit firm here to service increasingly successful Bermuda insurers.

Patrick J. Shouvlin of PriceWaterhouseCoopers LLP said,"These insurance firms are thinking about setting up their own internal audit departments.

"But rather than each of them going through the expense of hiring an internal auditor, perhaps we should set up a shared facility of internal auditors for them to draw on.

"The merger of Price Waterhouse and Coopers & Lybrand gives us the ability to put resources together and offer different services that otherwise may not have been offered.'' Mr. Shouvlin is responsible globally for the firm's insurance audit practice.

He is using his periodic visits to the Island to meet with insurance clients.

A year since the announcement of the merger of Price Waterhouse and Coopers & Lybrand, work is still needed in consolidating the Bermuda offices and the combined staff of 155, including 11 partners.

It became effective July 1 and the physical move of some local staff finally gets underway next month. Both Reid Street and Church Street premises will be maintained.

Two partners from each staff will switch offices. Certain managerial and administrative personnel will also make a move. The entire insurance division will be located at Church Street. The practice is now being divided according to industry groups. There will be no redundancies. In fact, more staff may be required.

Bermuda partner Ray Medeiros said, "It will be some time before we are all housed in one building. In most mergers, one party is dominant. In this one, it is a merger of equals. The irony is that both parties were looking to merge and both, upon doing their homework, came up with the same conclusion.

"In certain geographical locations around the world, one firm may have been more dominant than the other. In Bermuda, in terms of staff, Coopers had around 100 people and Price Waterhouse had around 55. It probably will be up to about 160, with the additional staff we need.'' Mr. Shouvlin added, "It's a key difference. The environment is so strong, that we are in a hiring mode around the world. We can't get enough people.

"It's not a merger driven by a desire to cut costs, but rather a merger driven by growth. We still need to get the word out to clients that they are gaining by this merger.

"It brings a certain critical mass, and while size in and of itself might not do anything for you, this brings a number of industry specialists together, and a greater pool of resources.'' Globally, the consolidation brought together 165,000 staff, including 8,500 partners and 75,000 people in the auditing practice.

This winter, executives from the combined worldwide operations of what was previously two firms, got together to develop a common audit methodology, taking the best of the two worlds. They developed computerised audit software to support that.

In the last five months of this year, PriceWaterhouseCoopers is engaging 75,000 staff in a three-day training course on the new methodology and software. It is also having the secondary benefit of co-mingling staff of formerly competing organisations. Staff are now all linked through a Lotus Notes database.

"You can start building that new corporate culture you need to build,'' said Mr. Shouvlin. "Doing that, puts us two to three years ahead of where the other firms were when they went through their merger. It took at least two years for those other firms to be using the same audit methodology, and in some cases three years. In some cases, they're still not.'' The firm is quick to note that there were more similarities than differences, in the corporate cultures of the two former firms. But there were some differences.

Coopers & Lybrand was organised more geographically in the US. Price Waterhouse brought to the merger their internal organisation along industry lines (insurance, investment management, banking), as opposed to geographic lines (Bermuda, New York, London) or functional lines (audit, tax, consulting).

Coopers had already decided to make a similar structural change. The merger accelerated that process.

This also means a more centralised hierarchy, where each division has offices in several parts of the world that talk to each other, and solve problems together.

Mr. Shouvlin contends, "Some of the other (accounting) firms have a Bermuda office that is an island unto themselves. They are not well connected to other offices.

"In our firm, the Bermuda practice is part of the global insurance practice and is viewed as one of the four or five major insurance centres of excellence we have in PriceWaterhouseCoopers.

"Here, the dynamic insurance market has not only bought into companies in the US, they now control a huge chunk of the Lloyd's market, and are experimenting with the capital market alternatives to insurance.

"It's a much different industry to the captive market and monoline insurers we saw a few years ago. The clients therefore have different needs and want to be served in a different way.

"They want a global organisation to support their global ambitions. We have the largest insurance practice around the world. That bodes well for us.

"That size will help us to pull together the required resources. The ability to move them around the globe as is needed is very powerful.'' Similarly, Coopers were far more advanced in terms of auditing technology.

Shouvlin admitted candidly, "Our's stunk. We were evolving it, but then we merged, and they had a great one. So we adopted it. Problem solved.'' Here in Bermuda, Coopers & Lybrand brought probably the Island's largest liquidation business to the table. They were strong in insolvency.

Another part of the Price Waterhouse corporate culture that is being maintained in the new entity is international profit sharing.

Said Mr. Shouvlin, "That causes people to think about the greater good, rather than their own `turf'.'' "But,'' said Mr. Medeiros, "from a legal point of view, we are a separate Bermudian partnership, distinct from the American partnership.'' Coopers & Lybrand were considered to be strong in middle market companies.

Price Waterhouse some time ago determined they didn't have the required resources.

But the merger comes with a realisation that today's middle market companies may be tomorrow's Fortune 500 companies.

IN HIRING MODE -- Patrick J. Shouvlin