Exchange's new chairman Arthur Sculley said.

Mr. Sculley, former head of private banking at JP Morgan & Co. Inc. and now president of private investment and advisory firm Sculley Brothers LLC, last week became the first non-bank chief appointed to lead the exchange.

While at JP Morgan, Mr. Sculley set up JP Morgan (Hong Kong) Ltd., the merchant bank which is the foundation of JP Morgan's extensive southeast Asian presence. In February of last year, he retired from JP Morgan after 25 years and several international assignments.

As BSX chairman, he will develop the BSX's international strategy which includes convincing Bermuda-domiciled Hong Kong companies, as well as offshore funds, to become BSX listed.

The Island exchange is "more efficient and cheaper'' for listing offshore funds than Dublin or Luxembourg, he said.

There is also potential for the exchange to grow through listings of Latin American companies. Many Latin American companies are interested in gaining increased exposure without the expense and bureaucracy of Toronto, London or New York listings, he added.

Though the exchange is looking to develop on these and other fronts, the most significant will be creating an arena where insurance risks can be traded, he said.

Securities now listed on the BSX can be traded electronically through Bloomberg terminals. An electronic settlement mechanism is anticipated next year.

Other efforts to trade risk have so far fizzled because they lacked real time cash trades to create indices, Mr. Sculley said.

The securitisation of insurance, through CATEX Bermuda, could reshape the way risk is swapped and sold, he said.

CATEX Bermuda is a BSX/CATEX International joint venture, subject to Government approval. CATEX International is a subsidiary of Catastrophe Risk Exchange, Inc. which recently opened a risk exchange in New York.

CATEX is an intranet which allows primary insurers, reinsurers and brokers to anonymously post risk they would like to sell, or swap for other risk or for cash.

"Bermuda can be on the cutting edge of new insurance products. The opportunity exists for Bermuda to move out in front and be the leader,'' he said.

He believes the current soft market for insurance rates will eventually end and insurers/reinsurers will need to spread risk through the capital markets.

A key step will be the creation of a database of insurance risk trades which will result in indices.

The indices, which will reflect underlying premium prices, will in turn allow financial institutions, like investment banks, "to create derivative products uniting the capital and insurance markets,'' he said.

"I would not expect the derivative products to be created until 1998,'' he added.

CATEX in New York is restricted to that state's licensed insurers or intermediaries. The exchange, operational for about three weeks, has 25 members. Non-New York insurers may subscribe using the services of a New York intermediary.

"We think this is the future for the reinsurers and distribution of risk between insurers,'' Mr. Sculley said.

Insurers and reinsurers, by posting transactions on the exchange, open up their pricing.

Mr. Sculley said that the response from the insurance industry in Bermuda has been good so far.

The BSX is inviting 15 founding member companies, insurers, reinsurers and brokers, to buy a stake in CATEX Bermuda for $100,000 each.

Under the proposal, the founding companies will get a two-year 50 percent discount on trading fees as well as management interest through a seat on a CATEX Bermuda steering committee.

BSX CEO William Woods said: "We want to create a forum where how much the premiums cost can be seen.'' Rather than eliminate brokers, this will open up new opportunities. They will realise business through consulting with investors looking to buy or sell risk.