reap substantial profits from the 1993 fiscal year.

This is the view of Mr. Donald Kramer, chairman of Tempest Re, one of the new local property catastrophe reinsurers.

On the second day of the Seventh International Reinsurance Congress on Friday, he outlined the history of the capacity crisis and the nature of the market's new competitors.

With a month of the hurricane season left, Mr. Kramer predicted the relatively benign season would leave catastrophe reinsurers with large profits.

"In 1994, which is almost a complete year from the premium point of view, the people, who have capitalised, will make a great deal of money,'' he said.

"The question is what do we do with it? Will we be seduced into writing other lines of business? Will we stray from our original business plan?'' Mr. Kramer said knowledge of the Bermuda-based competitors is largely restricted to information already in the public domain, as none have lengthy operating histories.

"Business plans of the respective new upstarts reveal essentially the same strategic intent, which is to capitalise on the demand and supply mismatch in property catastrophe.'' Where the new catastrophe reinsurers differ, according to Mr. Kramer, is on intent to lead business rather than follow. Some reinsurers intend to diversify outside catastrophe excess of loss into retrocessional, property per risk and casualty clash. Time commitment to Bermuda also varied.

He said the catastrophe reinsurers should be evaluated from the point of view of size. They should be capitalised in excess of $350 million; have technical expertise; strong sponsors making long term investment in the business, and also good asset management.

The new firms should be untainted by extraneous exposures. "The difference between the new Bermuda companies and Lloyd's is that the new arrivals are not bound by prior obligation,'' he said. "The biggest single problem for Lloyds is facing historic exposure. Lloyd's will still be dealing with earlier claims and administrative costs.

"In a March 1993, report written by one of the Lloyd's syndicates writing catastrophe, it was said that conditions are such that we now see ahead ten years of adequate catastrophe risks.

"He might have seen that in the London market, but he certainly didn't understand the US equity market, because we have been able to raise $4 billion, and the only questions are -- is it enough? Is it too much? and Is the game over before it has started?'' He believes that established lead syndicates in the Lloyd's market such as Gilchrist, Keeling and Taylor, still enjoy high credibility.

"They will make leading business difficult for any Bermuda market, unless these markets provide significantly more attractive terms and conditions and pricing,'' he said.

Referrring to the new reinsurers, he said: "All of us employ more sophisticated techniques than existed before with regard to the disparateness of our risk. We have discipline and are motivated by fear.

"The monoline catastrophe company does have some characteristics that are different. The multiline insurer has exited catastrophe because it creates volatility for him.

"We are willing to live with volatility. We are willing to dedicate very large amounts of capital to writing relatively small amounts of premiums so that we can withstand the shock of the one big one when it occurs.

"The real issue is when will this rush to Bermuda end. In the catastrophe business, anyone with good sponsorship, with $3-5,000 million cover and willing to take a limited amount of risk can enter the business.

"Regulation is also important and it is clear that we have to deal in a flexible, regulatory environment. We are all here because we think the rates are compensatory to the business and the returns on equity are potentially reasonable.''