Bermuda insurance market.

The Bermuda Insurance Index Fund was launched yesterday with the aim of tracking the Bermuda Insurance Index set up on July 15 by the Bermuda Stock Exchange and London's FTSE International.

The index is based on the stock market performance of ten Bermuda-based insurers and reinsurers weighted according to their market capitalisation. The fund will invest in the companies stocks according to their weighting on the index. The fund is open to investors with a minimum of $5,000 to invest. An initial transaction fee of $250 will be charged every time an investor buys into the fund. Another transaction fee of $250 will be charged when the shares are redeemed for accounts of less then $50,000.

On top of that initial expense, the fund will pay co-managers Kast Investment Management and Mutual Risk Management a two percent annual management fee based on the net asset value.

The fee excludes trading and organisational expenses which will be paid by the fund.

Anne Kast, president of Kast Investment, said the fund was designed to allow smaller investors a chance to participate in the performance of insurance companies with their global headquarters and senior management in Bermuda.

Rather than choosing one or two companies in which to buy, the investor can now buy into the group as a whole, owning pieces of all the companies .

"In effect, the investor needs only to have confidence in Bermuda's insurance market, and this fund provides the perfect vehicle and only practical method of purchasing a diversified portfolio which reflects the exceptional past record and delivers the future potential of the industry,'' Ms Kast said.

She said the fund was "not inexpensive'' to buy into, but this was because Bermuda was an expensive place in which to set up a mutual fund. Most offshore mutual funds charged between 2 to 2.5 percent management fee, she said.

Jim Kelly of Mutual Risk said the new fund aims to show the advantages Bermuda-based companies have gained from operating out of the Island as translated in their stellar stock performances as compared to other onshore insurers. The "Bermuda Effect'', as he calls it, refers to the advantages of having little or no taxes -- which allows faster capital accumulation -- and good management.

He said Bermuda companies were characterised by being marketing and client driven.

"That's certainly not the norm for the insurance industry,'' he said.

The index is made up of ACE Ltd., EXEL Ltd., Annuity & Life Re, IPC Re Holdings, LaSalle Re Holdings, Mutual Risk Management, PartnerRe, RenaissanceRe Holdings, Stirling Cooke Brown Holdings, and Terra Nova (Bermuda) Holdings. Mid Ocean Ltd. was listed separately until the merger with EXEL Ltd. was completed last week.

ACE is the heaviest weighted issue, with 29 percent of the index, while EXEL makes up 27 percent. Mid Ocean had made up 12 percent, a weighting which will now be incorporated into EXEL's weighting.

According to figures produced by the BSX, over the past 4 1 years to June 30, the index would have outperformed the NASDAQ insurance index by 75 percent, the S&P 500 Insurance Index by 24 percent, the S&P 500 by 39 percent, and the FTSE All Share Insurance Index by 108 percent. The performance comparison does not take into account charges for management fees, brokerage, and other expenses.

The fund's shares will initially be offered for sale daily until September 1 at a price of $10 per share. After September 1 the purchase price will be based on the funds net asset value. Trading will be done on a weekly basis every Wednesday.