Bermuda-based property catastrophe reinsurer, CAT Ltd., has projected gross premiums written for the year to December 31, 1997 will be about $151 million, an 11 percent increase over the $136.2 million declared for 1996.

The projection was made in their latest publication "Evolving Markets - A Future Look'', which also compares favourably the net income for the first six months of this year with the record profits of 1996.

Net income for 1996 was $84.9 million, up 71 percent from the $49.6 million in 1995. But net income for the first six months of this year to June 30 was $62.7 million.

Shareholders' equity climbed from $423 million at the end of December to $487.8 million at the end of June.

In a letter to clients, CAT Ltd. describes the 18 months to June 30 as extremely productive and successful with continued expansion of a worldwide client list.

CEO Paul T. Hasse and president Charles Kline, report: "We have developed important new capabilities in capital market products. We were also the lead investor in a new strategic risk financing reinsurance company (Enterprise Re).

"CAT Ltd. remains the market leader in developing innovative solutions in property catastrophe reinsurance. Our reputation in this area continues to give us access to unique business opportunities that are not available to our more traditional competitors.'' More than two thirds of their business is now written on a non-traditional basis and the portfolio of exposures is managed using CAT Ltd.'s Heuron system, technology used as an underwriting tool as insurance margins become narrower.

The company's 164 clients (14 more than last year) have been obtained through 30 intermediaries, and the Bermuda reinsurer was the lead or co-lead in 87 percent of their programmes as measured by premiums in force in July.

The letter states: "Over the last year, a number of transactions have been completed which transfer catastrophe risk to investors rather than reinsurers.

This securitisation of insurance or reinsurance risk has been widely reported upon but, until recently, actual trading activity has been minimal.

"We have both initiated and participated in recent capital markets activities, offering $29 million of coverage while securing $59 million of protection through several independent transactions.

"We expect this trend toward securitisation to continue. We have focused our efforts on identifying different perceptions of risk and risk-taking capability in the reinsurance industry and the investment community.

"We can then buy and sell reinsurance that is offset by financial instruments which transfer much of the underlying risk. Pure arbitrage is rare: the effect of these transactions is to produce an income stream for CAT Ltd. that is attractive relative to the risk assumed.

"This diversifies our portfolio and expands our ability to provide reinsurance in catastrophe-prone regions, which benefits our clients and investors alike.'' Last January CAT Ltd. and its owners invested $60 million in Enterprise Reinsurance, a newly formed provider of finite reinsurance, insurance and strategic risk financing, in response to the growing market demand for structured solutions for property, casualty, life and health insurance risks.

The investment partners include Employers Reinsurance Corp., The Chubb Corp.

and Morgan Stanley Capital Partners.

Meanwhile, insurance rating agency, A.M. Best Co., has reaffirmed CAT Ltd.'s rating of "A'' (Excellent).