In an editorial, London trade paper Lloyd's List claimed that the DTI is concerned that the Island's insurance laws cannot "police'' the rapidly expanding reinsurance market which saw more than $4 billion in new capital last year.

The editorial -- and earlier Lloyd's List reports that the DTI was issuing a "health warning'' on Bermuda and was worried by the security offered by some unidentified new reinsurers -- prompted heated disclaimers from local insurance industry and Government officials.

The editorial said that while some of the new companies -- like Mid-Ocean Re -- are backed by blue chip capital, "the DTI is concerned that some of the capacity on the Island is by its nature more speculative''.

"This, added to the fact that the DTI is worried the regulatory capability on the Island has not expanded in line with the capacity explosion, explains the UK's unease,'' the editorial said.

The editorial was run on the same day that Johnson & Higgins (Bermuda) chairman, Mr. Brian Hall, who is also chairman of Bermuda's Insurance Advisory Committee, responded to earlier reports in an opinion piece in the newspaper.

Mr. Hall, who is currently in London, said in his article, that "the non-captive commercial capital base of the Bermuda market now exceeds $10 billion, with total capital and surplus standing at more than $25 billion''.

He reiterated the point that many Bermuda companies are "far more soundly capitalised than their counterparts elsewhere''. The article said the wave of new capital last year was a vote of confidence in the Island, which had built a reputation as a sound, well regulated international insurance domicile.

He also said Bermuda's fragile economy had dictated that regulators keep a tight rein on insurance affairs.

He said: "Remember, we cannot afford to get things wrong! Our insurance industry is of much greater economic significance to Bermuda than, say Britain's is to its national economy or, for that matter, insurance is to the economy of the United States.

"In Bermuda's case, the insurance industry is a vital, irreplaceable pillar of a fairly fragile economy.'' He said that there was particularly close supervision and attention from the industry itself, from financial authorities and the Registrar of Companies.

Mr. Hall said Bermuda had been found to be the optimum choice of domicile and one of the best capitalised markets in the world, with by far the greatest concentration of unencumbered capital. That, he emphasised, is well known in London.

He concluded: "The common thread linking much of the media criticism now being levelled at Bermuda, stems from nothing more culpable than the undeniable fact that Bermuda has acquired, to quote a recent Morgan Stanley analyst's report, `prominence in the insurance world' and `will continue to expand, further increasing investors' interest in the leading companies in this important underwriting market'.'' Mr. Hall's article will be carried in full in tomorrow's Business section.

Mr. Hall said it was unfair to condemn the entire Bermuda market on the basis of the collapse of Bermuda Fire & Marine.

That company was put into liquidation late last year. It had earlier been involved in the controversial spin-off of its profitable local business in a $56 million sale which led to the creation of BF&M.

Creditors have questioned the deal, which Bermuda Fire & Marine maintains is legal.

Finance Minister, the Hon. David Saul, did not have to hear too much of what Lloyd's List had to say yesterday before emphatically stating: "Too much of this is sour grapes and innuendo. So much of what they say is unsubstantiated.

"We would like to cooperate with the Lloyd's market, because what is good for them is good for us. We have updated our insurance regulations just as often as we update the Companies Act, every year. We will have more changes again this year.

"The changes are generally recommended by the industry itself.'' Dr. Saul would say little more, but it is believed that some of the very legislative changes that may soothe DTI fears have in fact been worked on locally for some time, long before the matter was ever publicly raised.

Some industry sources believe local officials were close to bringing sweeping proposed changes forward.

The main concern in the local market today is that the insurance industry, which relies on perceptions, has not had its credibility damaged by the Lloyd's List articles.

Late last month, other insurers also hit back at the reports. National Underwriter, a US trade paper carried two front page stories in its March 28 issue, with insurance executives brushing aside criticisms.

Under the headlines `Brokers make case for Bermuda' and `U.K. denies warnings on Bermuda',the American paper quotes James Stanard, chairman, president and CEO of property catastrophe carrier Renaissance Re, as having said: "I believe the security of our company and similar new catastrophe companies in Bermuda is superior to traditional reinsurers because we, first of all, have no liability problems. We're writing conservative leverage ratios.''