SAN FRANCISCO -- To truly gauge risks from natural disasters, the property catastrophe reinsurance business loss experience would have to be measured in milleniums, a RIMS conference seminar was told last week.

But no-one has 1,000 years of data on hurricanes or earthquakes.

Chairman of Bermuda-based Tempest Reinsurance Company Ltd., Mr. Donald Kramer, explained that was why property catastrophe companies could not say if what they charged was based on true odds.

"All I can do to make sure that I provide capacity for the marketplace and hopefully not get killed, is to try to measure accurately and precisely my ultimate exposure. That's the only thing I can control,'' Mr. Kramer said.

"I can't tell you whether the earth will shake or the wind will blow, or when.'' Mr. Kramer drew an example that referred to a correlation established by a Colorado professor, that is built on a premise that when it rains in West Africa, the East Coast of the US gets a high frequency of hurricane activity.

"The correlation is very high. He is trying to predict whether it will rain in West Africa. If you assume he is right, and by the way, he is predicting that it is raining in West Africa this year, and we can expect to see a greater frequency of hurricanes.

"The problem is that you can have a great frequency of hurricanes in Florida, but none of them make landfall. Or, he could predict a drought in West Africa and we could have one hurricane, very far below the statistical probability and that could be Hurricane Andrew, only 50 miles further north.

"Fifty miles north would mean a $150 billion greater than the devastation that hurricane Andrew brought on.

"So it is very difficult to make bets on that kind of thing.'' Mr. Kramer said the eight property catastrophe reinsurers established in Bermuda had first year premiums of $1.363 billion and $660 million in net operating income, winding up with an average operating income/ROE of about 16 percent.

"Coming out of the box that is the fastest zero to light-speed acceleration in the history of the financial business,'' Mr. Kramer said.

"Let me assure you that no other company in the history of the financial business has ever accelerated as these eight companies have from zero to $600 million.

"Not Compaq computers during its highest growth phase, not IBM in its greatest growth year. Not any company ever from zero to lightspeed quite this fast.

"So what happened was that the demand was there, the industry produced $1.3 billion in premiums, 30 percent of the world market, first year.

"Northridge happened. Northridge was one of the worst earthquakes in the United States. It was the second largest catastrophe in the United States. And at this very moment, losses continue to escalate.'' Mr. Kramer said that one company has just bumped up its loss estimate by $100 million, 13 months after the fact.

But he said Bermuda companies were just coming on line and therefore had limited exposure to the LA earthquake.

Another speaker, Mr. John R. Cashin, executive vice president of Willis Faber North America estimated the Bermuda loss as a result of Northridge at $319 million, including IBNR, incurred but not reported.

Bermuda, said Mr. Kramer, is benefiting from the declining dependency upon Lloyd's of London.

"US insurers and reinsurers,'' he said, "are desperately, frantically trying to collect from Lloyd's because they are really concerned about Lloyd's long term future. There's a real concern about their future.

"I personally would like to see them succeed, even though I am a competitor.'' Mr. Cashin said that catastrophe losses have doubled every ten years for the last 50 years.

"In 1994 dollars, the last five years are almost 10 times the insured catastrophe losses of the decade of the fifties,'' he said.

Mr. Cashin stated that globally insured catastrophes had been steadily climbing on an annual basis in frequency.

He also said that Bermuda catastrophe reinsurers had incredibly attractive combined ratios for 1994, ranging from Partner Re's 35.20 to Mid Ocean Re's 80.8.

Mr. Cashin noted that the eight companies have common characteristics, such as being disciplined, well capitalised and engaging in analytical underwriting.

Their capacity ranges from $5 million to $60 million per programme.