HAMILTON, Bermuda -- The international reinsurance industry may be in rough waters, but reinsurers based in Bermuda are enjoying smooth sailing and fast growth.

The tiny British colony with its lenient regulations has long been an international centre for hundreds of captive insurance companies, those set up by corporations to insure their own industrial operations.

Now the Island's small reinsurance industry is flourishing, while Lloyd's of London and big US reinsurers are sharply cutting back coverage after heavy losses in 1992.

Financial reinsurance is bought by many US and foreign property and casualty insurers to spread their risks.

The biggest players in Bermuda's reinsurance industry are Centre Reinsurance Co., with $4.5 billion in assets, EXEL Ltd., with $3.2 billion, ACE Insurance Ltd., with $2.2 billion, and newly formed Mid-Ocean Reinsurance, with $350 million in assets.

All four are well-capitalised and stand to benefit from the current upheaval in the industry, experts say.

Bermuda's combined insurance and reinsurance industry has more than $52 billion in total assets, and it generates some $12 billion annually in premium income.

"The reinsurance business is facing structural changes and consolidation,'' Centre President Michael Palm said. "There's been a tremendous contraction of capacity in the business and very poor results among some companies.'' Reinsurance availability has sharply decreased and premium prices as much as doubled this year because of staggering industry losses in 1992 from hurricanes in Florida and Hawaii, the Los Angeles riots and the Chicago floods.

Skandia America Reinsurance Corp., Continental Reinsurance Corp. and the Yasuda Fire & Marine Insurance Co.'s reinsurance unit have already announced plans to withdraw from the North American market. Prudential's reinsurance unit is up for sale, and industry experts are betting Allstate may also try to divest its reinsurance subsidiary.

And the venerable Lloyd's, facing $5 billion in various losses, is trimming its sails in the reinsurance business.

"The reinsurance business in Bermuda is absolutely picking up some of the business that would have otherwise gone to Lloyd's,'' said Mary Anne Gangemi, an industry analyst with Standard & Poor's Corp.

Island reinsurers are also eagerly seeking business in Europe and Asia, experts said.

Centre, which wrote some $1 billion in net premiums last year, set up shop in Bermuda five years ago to specialise in customised, long-term reinsurance programmes. Centre also is trying to develop new insurance trading instruments to gain access to capital in the securities market.

Mid-Ocean -- whose backers include investor Richard Rainwater and former top executives at Aetna and Fireman's Fund -- also has set its sights high.

"The amount of capacity that we bring to the market falls far short of demand,'' said Mid-Ocean President Ian Heap. "I can certainly see us as a billion-dollar company in shareholder equity within less than five years.'' Companies based in Bermuda can build up tax-free reserves and command multi-million-dollar premiums for assuming large amounts of risk in policies that extend for several years.

Other advantages are the Island's sophisticated telecommunications and infrastructure, stable political system and accessiblity from both New York and London.

"I think the steady growth that we've seen here in Bermuda will continue,'' said Malcolm Williams, general manager of the Bermuda Monetary Authority, which supervises the financial industries. "We've been very particular about who we let in.'' That contrasts with the early 1980s, when Bermuda's reputation suffered as several captive insurers lost money when they experimented with writing third-party policies.

"A lot of reinsurance companies are rethinking whether they want to be in this business,'' said Keith Buckley, an analyst with Duff & Phelps. "For companies with expertise and appetite for this kind of risk, there will be more opportunities.'' -- Reuter The success of Bermuda's reinsurance industry has been highlighted in the following business feature distributed by the Reuter news agency. Written by Julie Vorman, the article will appear in newspapers and periodicals throughout the world.

MR. IAN HEAP -- `The amount of capacity we bring to the market falls far short of demand.' MR. MALCOLM WILLIAMS -- `I think the steady growth we've seen in Bermuda will continue.'