nother reinsurance company is set to leave the United States and set up in Bermuda to take advantage of the favourable tax, regulatory and financing environments on the Island.

Arch Capital Group Ltd, which is listed on the Nasdaq and has a market capitalisation of $193.75 million, has asked its shareholders to rubber stamp a decision to move its headquarters from Delaware to Bermuda.

It is not known at this time how many jobs will be coming to Bermuda or how big an office is proposed for the new exempted holding company.

The move is also subject to approval from both US and Bermuda governmental and regulatory departments.

A filing was made on Friday with the United States Securities Exchange Commission to approve the move.

Arch's Senior Vice President, Controller and Treasurer Debra O'Connor said yesterday that it was not the company's policy to comment on the SEC filing and would not release further details.

The board of directors has already unanimously approved the move to Bermuda and has recommended that shareholders vote in favour of the motion.

In a letter to shareholders, the company's chairman Robert Clements asked the shareholders to approve the reorganisation which would result in the formation of Arch Capital Group Bermuda, which would become the parent company of Arch Capital Group Delaware.

"The establishment of a Bermuda holding company for Arch Capital Group Delaware should allow us to benefit from a more favourable business, tax, regulatory and financing environment.'' More than a quarter of the company is owned by Bermuda insurance giant XL Capital, according to Hoover's Online, and Arch's chairman was instrumental in setting up XL.

Despite Arch making sales worth $349.4 million in 1999 it saw a net loss of $32.4 million in the same year.

For the six months to the end June 2000, revenues also fell 29 percent to $128.2 million.

The results were said to reflect a reduction in net premiums written and lower claims and commission expenses.

By moving to Bermuda, the company would be able to become exempt from a whole host of US taxes, according to Mr. Clements.

Arch, which was originally called Risk Capital Reinsurance Co., has 29 employees which are currently based in Delaware.

Arch, which provides risk services to multinational clients in the form of reinsurance and investment capital for insurance concerns, set up two companies in Bermuda in July 2000 to effect the move. These are Arch Capital Group Bermuda and Arch Merger Corp. At the moment neither of these companies has any substantial capitalisation.

If the move goes ahead the new businesses reserve the right to start up insurance and reinsurance companies.

Arch's primary subsidiary Arch Reinsurance Company, which targeted US and European-based insurance and reinsurance companies as well as certain Lloyd's syndicates was sold for over $20 million on May 5, 2000, when the company changed its name from Risk Capital Holdings.

Tax benefits lure company Among the specialty businesses that Arch covers are aviation and space, marine and accident and health business.

Mr. Clements, in the letter to shareholders, added: "After the reorganisation, we will be taxed in the United States only on that portion of our worldwide income that is attributable to the United States or our US subsidiaries, and we will not be taxed on capital gains on US investments or, except for applicable withholding taxes, on interest or dividends from US sources.'' He added that the reorganisation would offer greater flexibility in structuring international business activities.

Mr. Clements said that common stock in Arch Capital Group Delaware would be transferred to the Bermuda holding company automatically if the move was approved.

If the move is approved, the Nasdaq listing symbol will remain the same for the company -- ACGL.

The company was designed by Marsh Limited, the world's number one insurance broker, who still holds a significant stake.

Arch is a holding company which was incorporated in March 1995 as Risk Capital Reinsurance under the law of the State of Delaware and started operating in September of the same year.

An initial public offering raised $335 million. Of this amount $328 million went to the Arch Reinsurance Company as statutory capital. At June 2000 Arch Re had a statutory capital of $222 million.

In July 1998 Arch Re capitalised its wholly-owned subsidiary, Cross River Insurance Company with $20 million. This company received a Nebraska licence in October 1998 and can now operate in 22 states.

But on May 5 2000, the holding company sold the reinsurance operations of Arch Re to Folksamerica Reinsurance Company. $20.084 million was paid in the transaction.

At the moment there is no address listed for Arch Bermuda, and correspondence is to be sent c/o their lawyers Conyers Dill & Pearman on Church Street.

Yesterday stock was trading at $15 5 up 3 . The company's 52-week high is $16 3 , and low $11.

BUSINESS BUC