are now being considered more valuable risk management tools by their corporate parent, the president of the Bermuda Insurance Management Association (BIMA) said.

Alan Cossar points to a trend of healthy insurance company incorporations in Bermuda -- many of them captives -- during the persistent soft market as evidence of the shift.

Conventional wisdom holds that new insurance company formations rise during a hard market, when corporations or groups of companies seeking commercial insurance find the product scarce and subsequently move to set up their own insurance companies.

"You don't expect captive formations during a soft market,'' said Mr. Cossar, executive director of Alexander Insurance Managers, the captive management arm of Alexander & Alexander Services Inc.

Yet Bermuda's insurance company incorporation figures over the past three years (97 last year, 90 in 1995 and 94 in 1994) have been strong and many of the new incorporations were captives. The register's best year was 1986 -- the height of the last hard market -- when a record 125 insurers were added.

"Companies now have more structure to their risk management programmes,'' Mr.

Cossar says. "Captives can be used to measure how well a company's risk management programme is working.

"There is a greater recognition of the use of captives for risk management.

There is a subjective benefit. Captives provide a measurement tool.'' Companies setting up captives also recognise the "non-captive benefits'' the Bermuda market offers. New rules, which came into force on January 1, 1996 and break the industry into four classes of insurance companies, made it clear what anyone setting up in Bermuda can expect from a regulatory point of view.

"The success of the excess liability and property catastrophe companies here in Bermuda shows others it is a relatively simple process to set up here.'' Most -- Mr. Cossar estimated over 60 percent -- of the captives coming to Bermuda are being set up by US firms.

Asked which business sector carries the most interesting potential for formation of new captives, Mr. Cossar pointed to the US health care industry.

"The US health care industry is consolidating to form integrated health care delivery networks. Clearly this increases exposure.'' He said the industry is recognising that a captive is a good way to pull together the risks of a diverse group -- "to pool insurance and risk management''.

Health care captives are not new to Bermuda with about 90 domiciled here. But the biggest increases have come over the last two or three years.

Cayman Islands is generally accepted as the health care captive domicile of choice but Bermuda recently moved to raise its profile. Last October, Bermuda market representatives attended the American Society of Health Care Risk Managers conference for the first time.

Captive audience Two Thursday sessions at the Bermuda Insurance Symposium III highlight captives: In the morning, Mutual Risk Management (Bermuda) Ltd. president and CEO Simon Scupham, Marsh & McLennan Management Services (Bermuda) Ltd. president Andrew Carr and Corning Incorporated director, risk management & loss prevention Brian Casey tackle a dozen challenges facing the captive industry; and Burlington Northern Santa Fe Corp assistant vice president risk management David Burr and Ralston Purina Company vice president and director risk management William Drum cover "captives in a soft market -- why or why not?'' in the afternoon.

Captives are also scheduled to be part of a Bermuda market update session on Wednesday.

Health care sector an area of captive growth Mr. Cossar added that another change has been an increase in information about captives, primarily due to the new licensing requirements.

"In 1996, we had 97 new insurance company incorporations, the second dominant jurisdiction was Guernsey at 40, then Cayman at 39,'' he said.

Of the total insurance company incorporations in Bermuda in 1996, Mr. Cossar said just over half were Class 1 or Class 2 captives.

And at least one third of Class 3 companies added were captives, he added.

"We're very strong in total incorporations and very strong in pure captives.'' Numbers compiled from insurance company statutory filings and released last month by the Registrar of Companies demonstrated for the first time the size of Bermuda's captive insurance business at Janaury 1, 1996.

Of the total of 1,401 insurers registered in Bermuda at January 1, 1996, 867 were licensed as Class 1 or Class 2 insurers with many more captives holding a Class 3 licence.

Class 1 companies are single parent captives insuring only the risks of their owners or affiliates of their owners while Class 2 are multi-owner captives.

Class 3 includes entities with more than 20 percent of their net premium arise from risks which are unrelated to the business of the owners. This group also includes reinsurers writing third party business, insurers writing direct policies with third party individuals, and finite reinsurers. Class 4 insurers are the excess liability and property catastrophe companies.

The 1995 figures, the year for which the latest statutory filings are available, show Class 1 and 2 companies had gross premiums written of $8 billion and net premiums written of $5.7 billion. As a group, they had $38.2 billion in assets and $15.7 billion in capital and surplus.

Combined, all four classes of insurers had amassed $36.9 million in capital and surplus by the end of 1995, up from the $29.8 billion a year earlier.

Total assets at the end of 1995 were $95 billion, a 25 percent increase over a year earlier.

The Registrar of Companies also releases monthly incorporation numbers. At December, 31, 1996, the latest figures available, 1,470 insurers were domiciled in Bermuda compared to 1,401 a year earlier.

Captive audience Two Thursday sessions at the Bermuda Insurance Symposium III highlight captives: In the morning, Mutual Risk Management (Bermuda) Ltd. president and CEO Simon Scupham, Marsh & McLennan Management Services (Bermuda) Ltd. president Andrew Carr and Corning Incorporated director, risk management & loss prevention Brian Casey tackle a dozen challenges facing the captive industry; and Burlington Northern Santa Fe Corp assistant vice president risk management David Burr and Ralston Purina Company vice president and director risk management William Drum cover "captives in a soft market -- why or why not?'' in the afternoon.

Captives are also scheduled to be part of a Bermuda market update session on Wednesday.

Alan Cossar CONFERENCE CON BUSINESS BUC