ZURICH (Reuters) - Zurich Financial Services is investing $200 million in Endurance Specialty Insurance Ltd in a joint operation with Aon Corp of the United States, Europe's third-largest insurer said.

Zurich said the operation would help give Endurance, a Bermuda-based insurance and reinsurance company being set up by Aon, the world's number two insurance broker, underwriting capacity in commercial property and casualty insurance.

Investments from other financial services firms would bring total capitalisation of the new venture to $1.2 billion.

Zurich spokesman Max Gurtner said the investment was through the Capital Z venture capital and private equity fund, which is about two-thirds owned by Zurich. This meant Zurich would hold an equity stake of just 10 percent in Endurance.

"This is a good investment opportunity," Gurtner said, referring to a need in the insurance and reinsurance market for additional capacity after the September 11 destruction of the World Trade Center (WTC).

Aon, which is also investing $200 million, set up the firm to take advantage of soaring premiums after the attacks.

Analysts said the top insurers and reinsurers had the size and balance-sheet strength to benefit most from the post-WTC premium increases which reflect higher risks and demand.

While medium- and small-sized outfits were seen not to have the strength to take part in the upswing, well-financed start-ups could move into the gaps those firms would leave, they said.

Gurtner said he saw no conflict of interest between the investment and Zurich's existing investment, insurance, reinsurance and financing businesses in tax-free Bermuda.

The stock market largely shrugged off the news, focusing instead on market hopes for a round of interest rate cuts which should help lift the global economy out of its tailspin.

Zurich stock was up 2.8 percent at 405 Swiss francs by 1250 GMT.

Analysts said the market was reluctant to take the stock much higher before news on the imminent spin-off of Zurich's reinsurer Converium and its contribution to a $4 billion divestment drive to cut debt and raise cash for a resumption of business growth in 2002.

Apart from concern about the ultimate level of WTC losses, the stock has been dogged by expectations of lower capital gains, worries about high debt levels, the impact on earnings of a strong dollar, extra reserving and reorganisation costs.

Zurich has so far estimated losses associated with the WTC attacks at up to $900 million.