EVOLUTION OR METAMORPHOSIS? Wednesday, February 17, 2.15 p.m.-3.45 p.m., Atlantic Room C Moderator: Robert Mulderig Captive insurance companies have been the backbone of Bermuda's insurance industry since the first was established on the Island in the early 1960s.

Indeed, for many years, captive insurance was the Bermuda insurance industry's main, and perhaps only, claim to fame.

Bermuda has never yielded the lead it established in the field of captive insurance, despite concerted efforts by any number of other jurisdictions to offer their version of the Bermuda model to companies looking to incorporate and/or manage their own insurance operations.

In one of the World Insurance Forum sessions in the early afternoon of Wednesday, February 17, Robert Mulderig, chairman and chief executive officer of Mutual Risk Management Ltd., will moderate a penal discussion on captives, entitled "The Captive Concept -- Evolution or Metamorphosis?'' For his panel, Mr. Mulderig has selected: Mark Anderson, tax partner at accountants KPMG LLP; David Ezekiel, president and managing director of Bermuda-based International Advisory Services Ltd.; Oyvind Sohus, managing director of petroleum Geo Services Consulting; and Bill Voss, president and chief executive officer of Member Insurance Ltd.

The discussion will examining the historic development of captives from their origins to today's sophisticated uses as risk-financing tools. The panel will focus on creative uses for a captive in a soft insurance market, world-wide tax developments and the future of captive companies.

"We will try to examine two conflicting trends,'' Mr. Mulderig explained.

"The overall insurance market is extraordinarily competitive and soft, which can have the effect of inhibiting the use of captives.

"We will contrast this situation with the growing, sophistication of uses being found for captives.'' When Fred Reiss first promoted the notion of captive insurance 40 years ago, the idea was to allow companies to carry a share of their own risk under conditions which would allow it to reduce the cost of its insurance.

The uses to which the captive concept has been put since that time have carried Reiss's notion far from their origins, providing companies with a range of alternative risk transfer tools.

"Although pricing in the traditional market is down, captives are being put to many innovative uses in areas entirely outside traditional areas of insurance,'' Mr. Mulderig said.

Whether these new ideas have come in response to the continuing soft market, or whether the growing breadth and creativity of the insurance and reinsurance sectors came first, is not clear.

"A whole group of professionals in the service business, where we naturally want to find new uses for captive concept, have been thinking about such ideas all the time, and trying to hire other smart and creative people to assist in that effort.'' said Mr. Mulderig. "We have been able to come up with more ideas than would otherwise have been the case.'' Captive audience He continued: "From a buyer's perspective, corporations are looking at how one should appraise risk in a business organisation, and they see it in a broader way than has traditionally been the case.'' The very nature of insurance has undergone a dramatic rethink in the past 20 years, with Bermuda playing its part in the redefinition of the traditional role of insurance.

"The price of currencies or commodities used in the manufacturing process might once not have been immediately thought of as an area that would fall into the category of risk management,'' Mr. Mulderig said. "Today, business risks have been folded into the thinking of the risk manager.'' The insurance and reinsurance industries have taken on a broader role in the running of a business in the same time frame that Bermuda has matured from being, essentially, a single-product environment in captive insurance to today's broader-based market.

As the Bermuda market has matured, its players have redefined the nature of insurance, resulting in insurers and reinsurers taking an increasingly central part in corporate management.

More than a definition has changed in that time. Risk is the central tenet of business operations, and insurance the natural ally of the business manager dealing with risk in all its forms.

As Mr. Mulderig and his colleagues address the way forward for captive insurance companies, they will simultaneously be looking at a larger picture; they will be discussing the way in which businesses are most efficiently managed.

It is in this area that Bermuda has made its greatest contribution to the insurance and reinsurance industries.

-- Roger Crombie Robert Mulderig: Rethink Graphic file name: MULDI CONFERENCE CON `Although pricing in the traditional market is down, captives are being put to many innovative uses in areas entirely outside traditional areas of insurance.'