reaction to rate reductions sought by brokers, a leading reinsurer has said.

Michael A. Butt, president and CEO of Mid Ocean Re said, "I believe there is good evidence that the Bermuda reinsurers have been behaving very responsibly to this challenge.'' And cross-town rival reinsurer, Victor H. Blake, chairman, president and CEO of LaSalle Re said the Bermuda companies are not excited about softening rates, because of their substantially higher rate of return.

CAT Ltd. president Charles Kline agrees Bermuda reinsurers have behaved rationally, but he will not refer to the companies collectively as a market.

He said, "I don't think they should be looked at as a market. They are a group of large companies based in Bermuda, with their own strategies. Some companies will be more aggressive than others in certain parts of the world.

"To speak of the group as a Bermuda market, assumes that people will behave in a leader/follower mode around the world. But that's not the case.

"In London it is. They tend to behave in a leader/follower system. The market will tend to move as a group in one direction or another, based on the actions of certain recognised leaders. There is more individualism here.'' Added Mr. Blake, "There is more independence of thought here. We are more corporate, even though we are still part of a subscription market.'' Local reinsurers have thought seriously before walking away from some business and adjusting capacity in others. There is good reason.

Prices rose to such record heights by the early '90s -- up 200 percent in some cases -- so there is little concern about softness in the current market.

Said Mr. Butt, "In any cycle, you reach a point where it tops, and then there is speculation as to how far it will drop.'' Such speculation has already been heard from analysts and other stock market watchers.

Mr. Blake added: "The market over-reacts in all these situations. People assume because a softening of rates occur, even from an all time high, that it foretells a trend, which will repeat itself year after year after year, until we all disappear off a precipice. Life is not like that and neither is our business. Things do change.'' Mr. Kline said, "Most of the pressure on price has come from the large reinsurers in Europe, who it seems, are going again for the old concept of market share. The hardening market was a function of terms of trade and prices. People often forget about the terms.

"The retentions that clients hold went up dramatically in the hardening market, and in general they've stayed up. Prices also went up in the hard market and in general those have come down. But you still have a better product when compared to the previous soft market.'' The Bermuda companies are still awaiting the end of the hurricane season, knowing anything can happen between now and the next renewal season that might arrest the decline in rates.

But even if rates do not stabilise soon, Mr. Blake conceded it won't be the end of the world.

He said, "Without exception, all the Bermuda companies have made an awful lot of money in the last three years. You cannot make a 25 percent, 30 percent rate of return on the original investment year after year after year, without the customer saying this is not quite fair.

"When renewal time comes around, if indeed your experience is superb and profits are huge, you will recognise that you have to give a little bit. But you have to balance that against the fact that you don't know what next year will bring. So you can't give it all back, but maybe a little. That's the name of the game I've seen in the industry over my 40 years in this business.'' Reinsurers see the US remaining substantially more "properly priced'' than most of the non-US business. That's presumably because the capacities required by the US are larger. There is substantially more competition in Europe, hence pricing is less satisfactory.

Mr. Butt said, "One view is that managers will regulate their business more effectively than in the past. The real test will be the discipline that management applies to their underwriting in terms of when they reduce or walk away.'' Mr. Kline said: "In general, the US is still influenced by the areas that are out of capacity (Florida, California and the Northeast). They are better rates than some parts of the world, that are very low and below where we think its prudent to write at.

"It varies. Every part of the world is slightly different, so it is very hard to make gross generalisations. Some parts of Europe and Japan are low.''