The lines separating Bermuda's insurance companies will soon be unrecognisable as they continue to broaden their business, Mid Ocean Ltd. president and CEO Michael Butt predicted.

Over the past decade, Bermuda has established itself as a major centre in international insurance and reinsurance markets, usually through the formation of highly capitalised specialist insurers and reinsurers, he said.

Companies have been set up within three areas: financial and finite risk reinsurance, excess of loss (high layer) casualty insurance and reinsurance, and high capacity property catastrophe reinsurance.

Insurers and reinsurers will be more multi-line and more active across each others' areas of business, he said.

"Within two years, you will not be able to separate them,'' he said.

Excess liability insurer ACE Ltd.'s acquisition of Tempest Reinsurance Company Ltd. is a recent significant example of Bermuda insurance companies broadening their business.

"More and more the Bermuda company will be providing management and policy direction and providing capital to operating units that are physically diversified.'' Mr. Butt spoke yesterday at the Coopers & Lybrand/Hawksmere 10th International Reinsurance Congress at the Hamilton Princess.

Limitations on Bermuda companies include an increased focus on managing capital and underwriting policy.

And there are limitations to what can be achieved from a Bermuda base related to access to markets and expertise of those markets. Several Bermuda companies have taken stakes in Lloyd's of London managing agencies. These moves are part of that access, he said.

Mr. Butt also said that consolidation in the world's insurance industry will continue. He cited eight major company acquisitions on the world's insurance stage so far this year as well as eight in 1995.

The survivors will have a "global reach,'' he said.

And the players will likely have capital and surplus well above $400 million.

According to figures from Reinsurance Market Report, in 1994 the 15th largest reinsurance company is France's SAFR with capital and surplus of $450 million.

The largest is Swiss Re with $6.1 billion. Bermuda has five reinsurers in the top 15, PartnerRe, Mid Ocean Re, Centre Re, Tempest Re and Global Capital Re.

Bermuda companies have various advantages like "clean'' capital and Bermuda companies enjoy a tax advantage.

Asked if there would be consolidation among Bermuda insurers, Mr. Butt said: "I think the logic doesn't necessarily follow there will be a merger of Bermuda companies, the financial argument is not compelling for a merger of two property cats.'' But the there was a "stronger'' logic for ACE's acquisition of Tempest, he said.

TODAY AT THE CONGRESS DAY 2 -- DISCUSSIONS ON CURRENT ISSUES 8.45 a.m. to 8.50 a.m.: Chairman's introduction Ian Dilks, Partner, Coopers & Lybrand, London.

8.50 a.m. to 9.30 a.m.: Insolvencies: An update on current issues Moderator: Philip Singer, Partner, Coopers & Lybrand, London. Also: Steven Schwab, Partner, Rudnick & Wolfe, Chicago; Roger Enock, Partner, Freshfields Solicitors, London.

9.30 a.m. to 10.20 a.m.: Corporate Restructuring: Good bank/bad bank? Moderator: James Schact, Partner, Director of Regulatory Insurance Practice, Coopers & Lybrand, Chicago. Also: Alan Levin, Managing Director, Standard & Poors Insurance Ratings, New York; David Walsh, General Counsel, DBG, American International Group, Inc. New York; Robert Wilcox, Insurance Commissioner, State of Utah.

10.20 a.m. to 11 a.m.: Ceding illogic: A framework for allocating pollution and mass tort losses Peter Chaffetz, Partner, Chadbourne & Parke LLP, LA; Kenneth Pierce, Partner, Chadbourne & Parke LLP, Washington D.C.

11.30 a.m. to 1 p.m.: Current legal issues Moderator: Robin Mayor, Partner, Conyers Dill & Pearman, Bermuda. Also: Vivien Tyrell, Partner, DJ Freeman, London; James Corcoran, Partner, Caldwalader Wickersham Taft, New York; David Cain, Partner, Hebb & Gitlin, Hartford; James Johnson, Partner, LeBoeuf, Lamb, Greene and MacRae, London.

1.30 p.m.: Coopers & Lybrand golf tournament at Castle Harbour.

6.20 p.m.: Cocktail party hosted by Conyers Dill & Pearman.