THE slew of insurance companies which started up in Bermuda in the year following the September 11 terrorist attacks face "significant disadvantages" in competing with more established companies, according to a report by Fitch Ratings.

The report, entitled The Bermuda Class of 2001: What Do They Do After Graduation?, says the next 18 months will be a pivotal time in determining the viability of the start-ups.

Nearly 100 new reinsurance and insurance companies set up on the island in the 12 months after 9/11, but the group most often discussed, known as the "Class of 2001", comprises the seven companies which raised $500 million or more in initial capital.

Those seven are Allied World Insurance, Arch Reinsurance, Axis Specialty, DaVinci Reinsurance, Endurance Specialty Insurance, Montpelier Reinsurance and Olympus Reinsurance.

"Fitch Ratings believes that any Bermuda-based insurance start-up is competitively disadvantaged compared to a strong, well-established peer," said Fitch ratings director Donald Thorpe.

"However, start-ups can compete effectively with established companies struggling with legacy issues affecting their balance sheet, ratings or ability to provide ongoing service.

"Fitch sees start-ups moving in one of two directions," Mr. Thorpe added.

"Those organistaions that can successfully build a business franchise, particularly the ability to price and select risk, will likely prosper and those that cannot will likely end up in a run-off or combined into other entities."