Bermuda should think seriously about its response to rival markets in the event of the need for new capital to be raised in the insurance industry.

That is according to industry stalwart Henry Keeling, who took on the role of president and CEO of international operations at reinsurance broker Guy Carpenter in August, who spoke to The Royal Gazette yesterday about the reinsurance market, the likelihood of mergers and acquisitions (M&A) and his former employer XL Capital Ltd.

He said he was "very much" enjoying his new post and added that it was very different to what he had done before, which was something he had been looking for on retiring as XL's chief operating officer in August 2008.

In his latest undertaking based in Lloyd's of London, Mr. Keeling is responsible for all of Guy Carpenter's operations outside America, from Bermuda as far east to Japan, in charge of the marine, aviation and retrocession lines of business.

But his ties with Bermuda are still strong and he keeps a keen eye on proceedings from the other side of the pond.

"I think Bermuda is seen as one of the major markets, it has developed enormously successfully and I believe it will continue to in the future," he said.

"It has a strong reputation for strong capital and management and an increasing reputation for sound regulation, with the BMA (Bermuda Monetary Authority) having done a good job over the years.

"I think the situation for Bermuda is one that changes over time and we will continue to see change that will be to Bermuda's benefit, but also the nature of the business in Bermuda is changing to some extent as well and will continue to do so."

Mr. Keeling reckons the Island will be among many other competing markets looking to attract new capital to their insurance industries, including his own business.

"There are a number of competing environments, not least of which is Lloyd's of London, where I am based," he said.

"Bermuda really needs to think about how it would respond to other markets which are positioning themselves to be viable alternatives in the event that there is a need to raise more capital in the reinsurance industry."

Evidenced by Guy Carpenter's own Reinsurance Index, which revealed a rise of approximately 12 percent in shareholders' equity for the year, not including the third quarter, Mr. Keeling believes capital is coming back into the market and that the challenge is for underwriters to remain disciplined.

Mr. Keeling was part of a discussion panel of Guy Carpenter executives led by president and CEO Peter Zaffino, vice-chairman Richard Booth and global head of business intelligence Chris Klein, at the Rendez-Vous conference in Monte Carlo last month.

The panel's findings were that the signs were pointing towards a quite benign renewal season, in the absence of another major event, either in the property or financial market. Many factors could still change renewal pricing, while despite the challenging market conditions, they concluded that reinsurers have been able to regain much of the capital that was lost as a result of the financial crisis and 2008 windstorms.

And Mr. Keeling thinks that while any major events could have a big impact on the January renewals, there had to be some bias towards downward pressure on pricing. Furthermore, he foresees three main factors affecting the capital markets - an absence of major catastrophe losses benefiting underwriting, the probable continuation of reserve releases, the current accident combined ratios and what they show about the pricing levels, and a significant increase in book value as investment portfolios continue to improve and realised losses unwind themselves.

Mr. Keeling also maintains that he saw a continuing consolidation of companies in the reinsurance industry over the past 18 months, culminating in a number of M&As, most notably Validus' takeover of IPC and PartnerRe's acquisition of Paris Re.

His only surprise is that there have not been more such moves and predicts there could be others in the pipeline, while he is uncertain of what will happen with Bermuda's tax situation, particularly with insurers being targeted on several fronts, including by the Neal bill in the US.

"There is definitely some pressure for something to happen there," he said. "It is not immediately obvious what will happen there or what the consequences will be. With existing companies, if something were to happen, the effect would be marginal, but it could be negative for new businesses looking to set up in Bermuda."

Mr. Keeling, a Briton, started his career in London and spent 19 years in the Lloyd's and the London market as an underwriter and broker. He joined Mid Ocean Re 16 years ago and, prior to the firm's merger with XL, was president and chief operating and underwriting officer.

Mr. Keeling held the position of chief executive of global reinsurance operations for XL from 1998 to 2005 and was appointed chief operating officer in 2006, a role he fulfilled until 2008.

He retired from XL in August last year, having driven the company's property and casualty and life reinsurance segments, but had previously expressed his disappointment at not being chosen to replace Brian O'Hara as CEO, with Mike McGavick getting the nod over him last year.

"XL is still a company that is very dear to my heart," Mr. Keeling said. "Mike McGavick and the rest of the leadership team have done a great job and I think collectively they have held together very well."

Mr. Keeling, who was named (Re)insurance Person of the Year by the Bermuda Insurance Institute in 2007 and served as an operating partner of Stone Point Capital LLC prior to his latest appointment, is still a shareholder at XL, but for now is fully committed to the task at hand managing operations on a global scale at Guy Carpenter.