Bermuda-based Flagstone Reinsurance Holdings Ltd. announced yesterday that it will merge its Bermuda and Swiss operating units into one entity known as Flagstone Reassurance Suisse SA.

As a result, from September 30, 2008, the Bermuda unit, currently known as Flagstone Reinsurance Ltd., will become a branch of the Swiss operation, while Flagstone's holding company will remain in Bermuda.

Flagstone, a Class of 2005 start-up, employs around 50 people in Bermuda and company chairman Mark Byrne said he expected to increase the company's Island-based workforce.

Finance Minister Paula Cox issued a statement yesterday afternoon which said the Ministry would "monitor any developments including the fact that the company is planning to increase the number of staff in Bermuda".

Mr. Byrne said: "This restructuring consolidates our capital in one main operating entity, maximizing our capital efficiency and creditworthiness. Furthermore, Swiss companies, like Bermuda companies, are expected to obtain 'passport' rights throughout Europe for reinsurance.

"We remain committed to Bermuda as an operating platform and a key marketplace. We have approximately 50 employees in Bermuda and expect that figure to grow over the years."

In a statement released yesterday, Flagstone said the change in corporate structure would not result in any change of management or corporate control, nor will there be any changes to the board of directors.

The new entity will create a single balance sheet with a larger capital base to support Flagstone's reinsurance business. The company estimated total underwriting capital would total $1.6 billion, as of September 30, 2008.

The statement said the restructuring would offer clients "a choice of either Bermuda or Swiss underwriting access so as to participate fully in both the important Bermuda market and the global markets served in Switzerland".

Flagstone chief executive officer David Brown said: "This platform allows us to provide all our clients access to a single and larger balance sheet than previously available thereby providing a superior and more transparent credit.

"We will continue to serve our clients in the Bermuda and Swiss marketplace in exactly the same manner as we do today. We believe that this move benefits the needs of our clients and we remain committed to our financial strength and client service."

Minister Cox said Flagstone Reassurance Suisse had been given a licence to operate in Bermuda earlier this year and that the Bermuda market was "noting this move with some interest".

"It is our understanding that the shareholders of Flagstone Reinsurance Holdings Ltd., have voted in favour of merging its Bermuda operations into its Swiss operations with effect from September 30, 2008," Ms Cox said.

"Global companies choose Bermuda as a hub for their operations because of the qualities of the jurisdiction: speed of execution, effective regulation and its reputation for operational efficiency. This depth and diversity of Bermuda's market provides for endurance and stability.

"The Government of Bermuda intends that Bermuda continue to be an inviting place as a premier domicile of choice and we continually seek to upgrade and to enhance our business model. We appreciate the efforts of the independent regulator and the independent Financial Intelligence Agency which contribute to our positioning as an inviting premier jurisdiction of choice."

In its short life, Flagstone has achieved remarkable expansion, having grown from its Bermuda base to establish a presence in Switzerland, Dubai, India, South Africa, Puerto Rico, Canada, and the UK. Last week the company announced it was looking for a partner to venture into the primary insurance market in India.

Earlier this year, Ace Ltd., whose principal executive offices are in Bermuda, moved its holding company to Switzerland from the Cayman Islands.