OTTAWA (Bloomberg) - Franklin Montross, the CEO of Berkshire Hathaway Inc.'s General Re Corp., said more Bermuda-based reinsurers may combine after Validus Holdings Ltd. acquired IPC Holdings Ltd. for about $1.7 billion.

"Bermuda is logical," Mr. Montross said yesterday in an interview at a conference in Ottawa. "There are a lot of companies down there, many of them are quite small."

Berkshire, led by CEO Warren Buffett, invested more than $2 billion in Swiss Reinsurance Co. in March.

Later this year, the Omaha, Nebraska-based company made a cash offer for Bermuda-based IPC that was rejected, according to two people with knowledge of the bid. Mergers offer carriers the chance to expand as the recession weighs on demand for coverage.

"It's difficult right now with the economy being what it is," Mr. Montross said. "If we can add some new clients, that would be great. But I think it's going to be a difficult year to do that."

Billionaire investor Wilbur Ross said in March he was considering buying and combining reinsurers, citing "an awful lot" of companies with equity of between $1 billion and $2 billion.

Mr. Ross told The Royal Gazette last month that he believed Bermuda reinsurers were "severely undervalued".

Bermuda-based PartnerRe Ltd. agreed in July to buy Paris Re Holdings Ltd. of Switzerland.

Mr. Buffett, whose acquisitions and stock picks for Berkshire have made him the second-richest American, has invested the company's cash over the last year in financial firms hurt by the recession. He agreed in 2008 to spend $5 billion buying preferred shares in New York-based Goldman Sachs Group Inc., and this year added to stakes in Wells Fargo & Co. and US Bancorp.

Berkshire often makes a quarter to half its profit on insurance operations that include car coverage specialist Geico Corp. Mr. Buffett uses the "float", or accumulated premium, that his insurance businesses generate to invest before paying claims. The company scaled back coverage of the largest commercial properties against hurricanes and other catastrophes earlier this year amid price competition.

Mr. Montross was named the leader of General Re last year, replacing Joseph Brandon, who was once considered by analysts to be a potential successor to Mr. Buffett. General Re posted a $276 million pretax underwriting profit in the three months ended June 30, the best performance of Berkshire's four main insurance units. Reinsurers sell coverage to primary insurers.