risks for clients who previously had no options, president and CEO of EXEL Ltd. Brian O'Hara said.

Mr. O'Hara has watched, and participated in the concentration of financial and intellectual capital that has built up here in the insurance industry. He has observed the movement of investment companies here.

He sees more products coming in the future that provide for large customers, products that take risk off of their balance sheet, or transfer risk from their operation to local insurers. He sees a greater investment performance for the funds involved.

"The transactions become a little more fiduciary. It's not a straight risk transfer, but more of a risk sharing approach over a broader spectrum of risk, than previously undertaken by insurance and reinsurance.

"Before it was Acts of God, a big catastrophe, a large mistake with a product. But we see a growing capability on our part, and we think it will be pursued by others here, to provide protections in financial areas, whether it be interest rates, currency fluctuations or changes in commodity pricing.

These things will be combined and blended and our greater investment capabilities will be attractive to our large customers, in showing that we can give a more efficient return in the risk transfer process.'' Bermuda insurers are busy mining information to show large customers ways of solving problems that may not previously have been identified. Born of the competitive nature of insurance markets, companies are looking at ways of pricing larger risks and providing products not previously available.

"We are trying to explore new areas,'' Mr. O'Hara said. "The old core areas are becoming more commodity-like in the current atmosphere. That may persist for a long time, or forever. It's hard to say. It's very difficult to anticipate a big legal change, or a widespread product problem that might have large impact.

O'Hara predicts rosy future know they were coming, and they have a dramatic impact. We, and others, don't see anything like that happening on the horizon.

"The traditional areas of casualty risk transfer, for instance, one of our core lines, is becoming more commodity-like. And it is easily imitated by onshore, by London, by everybody. And there is more competition, more players willing to take large line risks, like we and others in Bermuda have.'' Mr. O'Hara has conceded that one drawback to Bermuda for international business is the lack of free access to the human or intellectual capital readily available in New York and London.

He added: "It's a very limited, small population. You don't grow up being exposed to a broad range of experiences here, but get it when you go away to school.

"It's been difficult for Bermudians to work with big companies in the US or London, although some have been lucky enough to gain that high level experience to bring back home. It is growing.'' Mr. O'Hara underscored the importance of attracting more qualified Bermudians to the industry, because of the expense and other difficulties involved in importing expatriate labour.

For one thing, non-Bermudian executives facing the uncertain future of moving to a new country will negotiate to offer their services here at a premium price.

And Mr. O'Hara said, "Insurance used to be a staid industry, where people spent an entire career with one company. But change came in the early '70s.

Being a cyclical business, the cycles became more dramatic, with more fallout, a larger difference between winners and losers, companies folding as others grew more successful.

"The pressure for the insurance market to perform more dynamically came as the other financial markets became more efficient.

"That's what I saw in the mid-1970s when I started hearing about the offshore markets, and particularly Bermuda. I was learning about why captives were being formed here.

"I saw at that time, factoring in other things like the travel and communications improvement, that Bermuda would be a likely site for business, especially the long tail casualty business. I didn't see the property cat potential until much later around 1989.

"Onshore, you didn't make a whole lot of money one year, but paid a whole lot of taxes, and then lost a whole bunch the next year and you wouldn't be able to recapture the taxes. Here, there is a smoothing ability, a tax free environment, and that is why it has been a good place for property cat business.'' Mr. O'Hara believes, as many in the market do, that increasingly there are companies buying into the market and taking much higher a risk profile than is wise.

Experienced insurance executives know that ultimately you have to pay, and generally very dearly for it. Rarely has it been a successful strategy in the insurance and reinsurance business.

"It is just like in the property catastrophe business,'' Mr. O'Hara explained. "Nobody knows who is doing a better job than the other guy until there is a big catastrophe. There is no way to test it. But we know eventually, for sure, there will be one. It is just a matter of time.'' But they have enough there to find out and will expand or contract depending on what happens.

"We haven't made a big commitment, but we have a beachhead from which to expand, if it looks like a good strategy for XL.'' XL and ACE obviously hold an optimistic view of the future for the Bermuda market, because of their substantial commitment to redeveloping the Bermudiana Hotel property. It gives them the access to growth, while having control over space.

"If we didn't see a positive future, we'd be crazy doing the Bermudiana deal.

Clearly, we are putting our money where our mouth is, and being optimistic and hopeful about new developments in the risk transfer business that will either start here, or of which we'll be an integral part of.

"We think the infrastructure continues to improve on all accounts. The initiatives we are doing in the educational field with the Bermuda Foundation for Insurance Studies, for instance, is going to develop more Bermudians in the actuarial, underwriting and broking fields, so that there will be a maturation of human resources that will put Bermuda in a much greater position to compete and expand down the road.

"There is certainly limitations to how many expatriates can come to Bermuda.

There are physical limitations. There may come a time when you can't start a company here if you are going to involve a lot of people.

"We may end up being very fortunate and lucky, those of us who got here earlier, to have a situation like the Bermudiana where we have a leg-up on anybody else who would want to take advantage of the great tax and regulatory environment that we have here. And then there is the issue of the growing infrastructural strain, people-wise and in terms of telecommunications.

"The communications point is significant for Bermuda -- to be able to communicate worldwide instantaneously from a small place in the middle of the Atlantic Ocean was probably unheard of some years ago. No one would ever have thought you could do that. No one thought it could be a viable place to do real business. But it is, and it will become even more so with the gains in technology.''