within the Alternative Risk Transfer (ART) market, is changing the direction of its underwriting to appeal to Fortune 500 companies.

With increased limits the Bermuda insurer, that was formed just last year, will offer a single block of capacity, so that insureds can avoid buying from dozens of different insurance carriers.

Harrington and their competitors were forced to review their rating mechanisms after some Fortune 500 companies complained that property cover was too expensive.

But while satisfying current needs, company executives are developing fresh ideas, with future plans to bring new, innovative insurance products to the market.

Harrington's president and CEO Hans Hefti said: "Underwriters have been pricing the Fortune 500 type of business the same way the industry prices the `retail' business. And that is wrong. We want to be a specialised carrier for Fortune 500 carriers, not for retail business. We have to strongly develop that know-how. We are going that route.'' It means highly sophisticated computer modelling techniques for assessing risks and establishing ratings, highly sophisticated computer modelling techniques not dissimilar to those used by the Bermuda property cat reinsurers which write the "retail'' business.

Mr. Hefti said: "We have access to the know-how (through Harrington owners Swiss Re and Winterthur Swiss Insurance Company), because of our consultancy agreements. We will analyse the book of business and, ultimately, the aim is to have that type of rating expertise which reflects risks more closely to reality for those Fortune 500 companies.'' As a result of Harrington's clients looking for large blocks of stable capacity from secure providers, the firm is increasing its limits, from $100 million maximum foreseeable loss (MFL) to $125 million MFL.

MFL is a worst case scenario under which an estimate is made of the maximum dollar amount that can be lost if a catastrophe occurs such as a hurricane or firestorm. It is very high severity, low frequency business.

Said Peter J. Fallon, senior vice president, chief operating officer and chief underwriting officer: "For the type of client base we work with in the market, it is very inefficient for them to go out and try to place their business with a number of different providers of capacity, which may range from $5 million on the low end to say, $50 million or $75 million on the high end.

"They should be really focusing on loss prevention, loss control, true risk management, and not worrying about renewing their programmes year after year with 25 different carriers. We are trying to provide a single large block capacity for them, so they could basically focus on other things that are important.'' Set up in April, 1995 to reinsure captives, the firm began writing property business, fire and business interruption risks and machinery breakdown.

Marine business included all classes of hull and cargo for blue water, coastal and river risks. But after $5 million in premium for marine business, the company considered it to be unprofitable. As of July 1, they sold most of the marine portfolio and put the year's worth of business they did write in run-off.

The company has quota share and excess of loss retrocession arrangements in place to limit its liability on both a per occurrence and catastrophic basis.

Harrington had 47 accounts in the first year of operation, with each of them paying an average of almost $1 million in premium, comprising a $45-million book of business.

For the 12 month period to June 30, there was a gross combined ratio of 71 percent. Assets were at $130 million and gross premiums earned tallied $65 million. Investment income of $3.5 million led to net income for the first 12 months of $720,000, after a $2.3-million bill for development costs.

The loss ratio of 52 percent accounted for $17.9 million in losses, including a recent $11-million loss after an explosion at a petrochemical plant in Texas.

Harrington's predecessor, Hopewell International, was placed in run-off, and its portfolio of business completely re-underwritten by Harrington.

Managed by International Risk Management (Bermuda) Ltd., Hopewell was operated for the benefit of subsidiary insurance companies, the majority of which were managed by the International Risk Management Group IRMG.

IRMG is the longest established and one of the largest independent captive managers in Bermuda. Commencing operations in 1958 under Fred Reiss, they were established in Bermuda in 1963.

Harrington's senior vice president, chief operating officer and chief underwriting officer, Peter J. Fallon said: "IRMG was going to have an underwriting facility called Harrington, similar to the underwriting facility that they had with Hopewell.

"That was the initial plan as far as IRMG was concerned, but then very shortly after the company was formed it was basically decided to change that.

IRMG now focuses on strictly servicing business. It does not get involved with any underwriting.'' Said Mr. Hefti: "We still wanted IRMG to be the preferred service provider, but providing unbundled services in captive management and engineering. But no underwriting.'' He said: "Hopewell was a disaster to reinsurers. That's why it failed.

Hopewell was part of a market problem. There were other companies that had similar problems. They were just not appropriate anymore.

"It was capitalised very low. The underwriting was much, too much client-driven. It was owned by the clients and they were doing their own underwriting and that doesn't work. And it was also very US-driven. There was very little European connections.

"Swiss Re and Winterthur can look at the market with a different focus, on a worldwide basis. We want diversification over time and geographical regions.

"The market is changing fast. In the US, the captive movement is stabilising, while the captive movement in Europe is developing fast. We need to spend more emphasis now on attracting European business.

"We are now the largest provider of capacity for industrial property clients, certainly in Bermuda, which we can offer on a non-proportional excess-of-loss basis or quota share, as we differentiate ourselves from other markets who also offer substantial capacity, but work mainly on an excess-of-loss basis.''