Rising food prices have provided a boost in the midst of a soft market for those Bermuda insurers and reinsurers who offer agricultural insurance.

One such company is PartnerRe, whose chief executive officer Patrick Thiele said that while rates across most line of business continue to fall, agriculture is providing a welcome exception to the rule.

Mr. Thiele said increasing demand for food had led to prices of some crop commodities rising by double or even triple. The corresponding increase in insured values of the crops insured had boosted premiums.

"We've found some opportunities in the US agriculture market — an opportunity that's going to cost us some money in 2008, as the floods in the Midwest rolled through," Mr. Thiele told The Royal Gazette.

"Demand continues to increase for food. The growth in ag. insurance and reinsurance has been dramatic. It's already showing the US, it's beginning to show up in some parts of Europe and in developing countries, it'll be pretty spectacular, I think.

"China is examining its agriculture insurance market and they've announced improvements and my guess is they'll have to reinsure it, because the capacities needed are pretty large."

"In China, it's a way to subsidise the farmer. There's a concern about the growing divide between the rural and urban communities. If you can find a way to get stability in income to the farmer, that's helpful to them from a societal standpoint."

RenaissanceRe and Max Capital are two other Bermuda companies to have increased their focus on the agricultural sector.

Most companies in the Bermuda reinsurance marketplace have been unable to match the bumper profits of the past two years as insurance rates have declined. PartnerRe is one of few to have actually increased premiums written, something Mr. Thiele attributed partly to the agricultural business, but also to last year's acquisition of the international reinsurance business of the France-based Monceau Group, which began showing in PartnerRe's financial results in the first quarter. Additionally, PartnerRe gained has seen an increase in its Brazilian business, having gained a licence as an admitted reinsurer in a market which has opened up this year, having previously been nationalised.

"We've been in a softening market on the casualty side for seven years and on the property side for two or three years," Mr. Thiele said. "In a softening environment you have to find those opportunities that can keep the organisation together and maintain stability in your overall book of business.

"If you manage to do that, when the cycle turns and prices increase, you've maintained your infrastructure, people and distribution, and you'll be fully able to take advantage of the upturn. We don't have growth goals in our organisation, but we have goals around maintaining portfolio diversification and stability."

PartnerRe recorded a loss of $26 million for the second quarter of 2008, despite a hefty increase over last year in operating income ($183.8 million compared to $136 million), an improvement in gross premiums written ($968.2 million compared to $907.8 million) and a solid combined ratio (85.9 percent).

A new accounting system adopted by the company, known as FAS 159, means that changes in the value of PartnerRe's investment portfolio are now recorded in the income statement. Regulators have encouraged the use of the new system, but it is optional. PartnerRe has adopted the new standard fully, while others are using it partially or not at all.

"It just reflects the random volatility that you're going to get if you have a $12.5 billion investment portfolio," Mr. Thiele said of PartnerRe's second-quarter result. "If interest rates go up, the value of your bonds goes down. Over a year or two, it all evens out, but we now have enormous volatility in our quarterly income statement.

"Because not everyone has adopted it, people will be comparing apples with oranges. It's going to be very difficult to draw comparisons and to truly evaluate the strength of insurance and reinsurance companies.

"It puts the burden of analysis and interpretation squarely on the analysts to tease out from financial statements what is random noise and what are real business trends.

"Combined ratio, operating income and book value per share growth as the three key metrics of an insurance company, then they don't change as a result of the accounting changes. Net income does and therefore has become less relevant." Mr. Thiele sees more premium coming in from Brazil over the next year or two, particularly as the reinsurance market in the South American country goes through a transition from the monopoly of the sate-owned reinsurer IRB to an open market. And he sees Brazil as a better prospect than China on the emerging market front.

"Pricing is still pretty good, as they move from monopoly rates, which are very high, to competitive rates," Mr. Thiele said. "Over time, Brazil will become a competitive market, but at the moment there is still some vestige of the monopoly-type rates in the pricing.

"It's a $2 billion market and it's growing rapidly, as is the Brazilian economy. I see it as a bigger opportunity in the short- to medium term than China. China is still a relatively small reinsurance marketplace and rates are incredibly competitive." Sustained double-digit percentage growth in the China economy over recent years had not translated into a an attractive reinsurance market — not yet anyway, Mr. Thiele said.

"We're doing less business there than we were five years ago," the CEO said. "It's directly related to the amount of competition and the pricing levels, which are basically profitless."

PartnerRe has a representative office in Beijing and has being writing business in China for many years through its Hong Kong office.

The company celebrates its 15th birthday this year. One of the Class of '93, set up amid the industry capacity shortage in the wake of Hurricane Andrew, the company has diversified from its property catastrophe roots.

The reinsurer has 960 staff world-wide, 80 of them based in Bermuda. Around 70 percent of the local workforce is Bermudian.

With most of its business written through subsidiaries around the world, Mr. Thiele said PartnerRe was a truly global company with a business model different from the many Bermuda competitors who had their operating bases here. But he considered Bermuda "a great place" to have a reinsurance company headquarters.

"It's advantage is neutrality. PartnerRe is a global company, with three large offices in Paris, Zurich and Greenwich, Connecticut. If the headquarters was situated in any one of those three, it would potentially cause friction.

"We pay a bit more for that privilege. In the scheme of things, a few million dollars extra is not that much, but obviously, there is concern with the rising cost of doing business in Bermuda. We're also concerned over our ability to attract talent to Bermuda. That hasn't really been an issue for us in the past. Part of it is that we're kind of full up down here."