tested yet by claims from catastrophic events, according to PartnerRe Ltd.'s senior vice president and chief financial officer, Mr. Scott Moore.

It was part of a list of insights into his industry delivered to Deloitte & Touche's Executive International Insurance Seminar on Thursday.

Mr. Moore said: "There's been a lot of activity. We think that there's sufficient capacity in most places in the world, except perhaps the US. Rates will be a combined function of the desire for the capacity to add business and whether or not there are loss events that may fall through to the demand side.

"Geographical spread is important and I think the companies will be looking to broaden and penetrate other markets.

"In the investment environment, we saw last year that the bond and currency markets were perhaps even more volatile than the catastrophe environment. I think that probably for the balance of the year in the US, rates are falling off, but I think my bet right now would be that rates may actually pick up at the end of the year.

"The economy was just going too fast in the US, in my opinion, to have come to a sudden halt. We may actually shorten the portfolio a little bit this year.'' One thing the Bermuda cat companies share is their conservative investment strategy. They are all in high quality fixed income securities, no equities, no explicit mortgages, no real estate, minimising risks on the asset side to balance the the fair amount of volatility on the underwriting side of their book, he said.

They deal in short duration (3.4 years) interest rate management in the portfolio and supplement it with an unsecured credit facility, which is put in place for $300 million, providing liquidity in the event of a need for short term cash advances or letters of credit to secure recoverables, especially in the US.

Said Mr. Moore: "We diversify within the parameters that we set for ourselves. We look to take advantage of intra-market pricing differentials, so that we can achieve the best yield that we can.

"And we also maintain a foreign portion of the portfolio. We take funds from certain currencies and maintain the investments. We have got about $135 million that is built up in nine of the stronger currencies of the world. We will build those funds over time, as an explicit hedge against the off-balance sheet exposures for those countries in which we write the risks.

"The yield to the end of March is 6.8 percent. We will probably get a little bit shorter with interest rates falling off. I don't think that it will get much higher than that this year.'' Mr. Moore reviewed the recent trend of the increasing frequency and damage-related severity of hurricanes. He reiterated the property catastrophe reinsurance market stance that storm data may need to be viewed over a longer period of time than existing data allowed for to see any trend or cycle.

In 1992, there were $22.5 billion of insured losses, mostly as a result of Hurricane Andrew. In 1994, the figure had moved to $13.5 billion, mostly as a result of the Northridge earthquake.

"The cause for the increase in the severity of these can most logically be explained by the increase population and density in the coastal areas and the urban areas, which also happens to be where most of the risks are,'' he said.

Mr. Moore said demand remained strong in the US, where insurance companies there could not get all the property catastrophe reinsurance coverage that they want.

"On the supply side, while we thought Lloyd's would go away, with prices still remaining attractive, Lloyd's has stayed as a factor in the market.

"There has also been a renewed interest and an increased level of participation by London market companies. The continental reinsurers, Swiss Re and Munich Re, didn't really withdraw capacity and the professional reinsurers also stayed involved.

"And retrocessional support returned to the market, some of which was ordered by the new capital that came to Bermuda.'' Mr. Moore emphasised that the individual companies that operate in the property catastrophe reinsurance market operate differently. He said that while there was a tendency to lump the companies together as one market, they had different strategies, with different ideas.

Mr. Moore said that with it was worth considering the capital base of the eight cats, showing their measure of financial strength.

But he also said: "These eight companies have produced in their first full year of operations $1.3 billion or so in premiums. That's estimated to represent in excess of 20 percent of the world market share of the property catastrophe business.

"And if you were to look at varying levels of return in the aggregate, the companies all produced in excess of 15 percent return, on average. All the companies operate very leanly, very efficiently. All the expense ratios are very relatively low. If we were to get such information for the London market or the Lloyd's organisation, you would see the dramatic difference.'' Mr. Moore said PartnerRe was operating in 37 markets around the world, with 47 percent of premium volume coming from North America. The distribution of risks is also spread out.

"We also look to achieve a broad distribution of our client base. We've always been geared to operate with fewer, rather than a lot of clients. We have, as of the end of March, about 170 clients with premiums in force of a couple hundred million dollars. We produce over $100 million per client. It allows us to be very focused, have more client base and reduce the administration and the overhead.

"And 99 percent of our business is property. We write principly excess of loss business. There is some proportional business of a Japanese programme. It is Japanese quota share of earthquake.

"We write 98 percent treaty business, and two percent facultative, generally facultative programmes where we support captives, so that really represents an underlying portfolio of risks, as well.''