have-nots based on the emergence of new technology.

That is the view of executives of RenaissanceRe, president and chief operating officer Will Riker and executive vice president David A. Eklund.

They wrote in the Bermuda reinsurer's annual report: "The emergence of new technology has changed the way reinsurers and insurers evaluate catastrophe exposure, enabling them to better quantify and understand the risks.

"However, not all reinsurers have embraced this technology and reinsurers lacking technology are relying on outdated `heuristics' to evaluate risks.

"This market rift, between those organisations which possess and utilise new technology and those who don't, is responsible for numerous recent examples of irrational pricing, almost exclusively on the side of under-pricing the risk.'' They said the new technology has allowed companies to better evaluate the "true cost'' or expected losses of the catastrophe product.

Meanwhile, the company's reinsurance or insurance policies do not specifically provide coverage for losses from the Millennium bug. And the company has begun to explicitly exclude coverage for Year 2000 losses from its policies, and expects to adopt this wording for the majority of its policies and contracts going forward.

The company believes that the potential for material loss due to this exposure has been, or will be, minimised; however, there can be no assurance that potential losses would not have an adverse effect on the future results.

The company anticipates completing its own review of systems relating to the Year 2000 issue by this December, but said future costs are expected to be minimal and will not adversely affect the results of future operations.

During a strong year, including achieving one of the highest return on equity (ROE) positions in the property and casualty market, RenaissanceRe also suffered a head cold from the `Asian Flu'.

And although the Bermuda-based property catastrophe reinsurer lost 2.8 percent of its asset portfolio due to the Asian financial crisis, the portfolio was quickly re-balanced to maintain its conservative profile.

The company provides property catastrophe reinsurance coverage to insurance companies and other reinsurers primarily on an excess of loss basis.

The firm increased its public ownership during the year from 26 percent at the beginning of the year to 54 percent.

Senior vice president and chief financial officer, John M. Lummis, said, "The most important capital management question that faces RenaissanceRe is how to utilise the excess capital that the reinsurance business is likely to generate in 1998.'' Claims and claim expenses for the year were relatively low, and amounted to $50 million (1996: $86.9 million).

Provisions of $15 million were for claims incurred from Hurricane Fran, which struck North Carolina during the 1996 third quarter. Some $9.3 million was for claims incurred by regional midwestern clients related to severe wind and hailstorms during the 1996 second quarter.

Pay outs for the 1996 first quarter Northeast US winter storms amounted to $8.3 million. Floods in the US Northwest in December 1996 led to paid claims of $7 million.

Also, during 1996, there was $12.1 million of development on prior year losses, which primarily related to a $3.2 million development on losses related to the 1994 Northridge Earthquake and a net development of $3.5 million for Hurricanes Luis, Marilyn and Opal which occurred in 1995.

Gross premiums written declined 15.4 percent due to a 17.4 percent decrease in premiums due to non-renewals because of unattractive rates and a 9.6 percent decrease related to changes in pricing, participation levels and coverage on renewed business, partially offset by an 11.6 percent increase in premiums related to new business.

Chairman, president and CEO, James N. Stanard, commented: "Note that the decline in premium over the last two years is almost entirely due to our net position in the retrocessional market (reinsurance of reinsurers): we are purchasing more and selling less.

"Reinsurance of primary insurance clients was about flat this year, after growing in 1996.'' RenaissanceRe remains broker-driven, but says client consolidation has been a major contributor to the drop in retrocessional premium income, as the combined entity usually buys less reinsurance.

Mr. Stanard stated: "Consolidation among our competitors has not hurt us so far. With the security we offer, we benefit from the trend of clients seeking to deal with a smaller number of reinsurers -- we are one of the survivors when cuts are made.'' The firm's biggest operational accomplishment during the year was the expansion of its primary insurance business.

RenaissanceRe's 80 percent owned surplus lines company, Glencoe Insurance Ltd.

is licensed in 26 US states. Gross written premiums for the primary insurer rose from $1.5 million in 1996 to $7 million in 1997. Home-owners insurer, DeSoto Insurance Co., was started, as plans matured to acquire Nobel Insurance Co., a specialist in low value dwelling (homes valued at under $100,000) homeowners insurance. Nobel is a licensed insurer in all 50 states.

RenaissanceRe declared net income of $139,249,000, down from $156.2 million the year before and the 1995 high of $162.8 million.