The worst part of the credit crisis is over, but there is still a long way to go before the market makes a full recovery.

That is the view of Andrew Baron, senior portfolio manager for fixed income at Butterfield Asset Management Ltd., who was speaking on a panel alongside John Hughes, partner at Edwards Angell Palmer & Dodge, Will Thomas-Ferrand, senior vice-president at Marsh Management Services (Bermuda) Ltd. and Tom Kelly, a partner who specialises in insurance at KPMG, Bermuda and moderator Katie Tornari of Marshall Diel & Myers, Bermuda at the Bermuda Captive Conference held at The Fairmont Southampton yesterday.

Yesterday, The Royal Gazette reported that HSBC chief economist and fellow speaker Ian Morris predicted the recession could end soon and we may even see a return to growth in the US economy.

Other topics discussed included types of claims arising out of the crisis, accounting changes and their impact of captives in the future, questions the captive managers should be asking their investment managers and dealings with the Bermuda Monetary Authority.

Mr. Baron said the credit markets and America's economy had started to turn the corner, however, he warned it could be some time until they moved into positive territory.

"In brief, I would tend to agree that the severe portion of the credit crisis is over and that we have returned to somewhat of a market normalcy," he said.

"On the other side of the coin, we also do not think that the US is about to turn around and spring forward."

Mr. Baron said, in contrast to Mr. Morris' view on the state of the US economy and the rosy picture he painted talking earlier at a session on the economic impact on the insurance market, he reckoned that while the market was turning around with low inflation, the falling housing market and decline in consumer spending over the last quarter would have a lasting effect.

"People do not quickly forget that kind of loss of wealth and, in particular, from a demographic standpoint, the Baby Boomer generation is nearing retirement and people do not forget quickly about the loss of 30 percent of their house value," he said.

"As you near retirement and are expecting a certain level of comfort, income or security, this type of destruction of wealth in the US is not easily forgotten.

"Then you have the growth of the US consumer spending fuelled by the debt bubble. Add to that an employment picture which a lot of people talk about as a lagging indicator that is still worsening and it is clear there is still a long way to go."

Citing an unemployment rate of 10.5 to 11 percent, Mr. Baron believes that despite a slowdown in the number of jobs, there has been a sustained period of sky-rocketing unemployment.

"You are getting a fiscal stimulus led stabilisation at best," he said.

"And that is better than minus six percent GDP where there was nowhere to go but up.

"I think we will see an 'L'-shaped recovery as opposed to going back to the two-and-a-half to three-and-a-half percent growth in the near future."