Glencoe Insurance Ltd. has been given the green light to underwrite California earthquake insurance directly through that state's wholesale brokers.

Glencoe is a subsidiary of RenaissanceRe Holdings Ltd.

The company got the go-ahead this week from the California Department of Insurance when it approved Glencoe as a non-admitted surplus lines insurer.

Surplus lines is specialised property or liability coverage provided by a non-admitted insurer where it is unavailable from state licensed insurers.

The approval enables Glencoe to bypass Bermuda brokers.

"We're one step closer to the source of business,'' said Glenn Thomas, senior vice president and chief underwriter for Glencoe.

Much of the California quake business that comes to Bermuda brokers does not come here unless the risk is difficult to place by California wholesale brokers, he added.

But Insurance Brokers Association of Bermuda chairman Peter Dunne said the Bermuda market will still see opportunities to place business with Glencoe and that "the market continues to grow.'' Mr. Dunne, managing director and Triangle Brokerage Ltd., also said Glencoe's move could subject the company to California rules.

Glencoe will have to file basic financial information with California authorities but Mr. Thomas said it would be far from onerous.

Glencoe was set up with $50 million in capitalisation and will specialise in property excess and surplus lines.

Glencoe will consider other catastrophe and weather related perils using difference in conditions (DIC) or limited peril forms, the company said.

DIC insurance covers physical structure, merchandise, machinery and inventory within a structure in case of earthquake or flood. Several important perils are excluded under a DIC form but assumed under business property insurance policy.

Glencoe also said that Underwriters Reinsurance Company of Woodland Hills, California has purchased 100,000 shares, or 20 percent of Glencoe, while Dames and Moore Ventures has purchased 49,500 shares, or 9.9 percent of Glencoe.

RenaissanceRe holds the remaining 70.1 percent.

Dames and Moore Ventures is a subsidiary of Los Angeles-based Dames and Moore Inc., a leading engineering and consulting firm.