inevitable'' $50 billion catastrophe strikes the US, an underwriter said yesterday.

"There is little possibility of a US solution under existing insurance mechanisms backed by reinsurance. The exposures are now far too high,'' said Wellington Underwriting Group Ltd. underwriter Mr. Anthony Taylor.

Mr. Taylor, one of four insurance executives participating in the Bermuda Insurance Symposium II's panel discussion on global property catastrophe capacity, said the US insurance industry has a capital base of $189 billion which cannot effectively support a loss of $50-$100 billion, he said.

US reinsurers provide $20 billion in capital and surplus.

Non-insurance capital markets can take the same exposure and spread it over a base of $19 trillion with some savings in risk load.

There is a shortfall in capacity in the US, especially in New England, he said.

The direct market could take $38 billion in losses in a potential $50 billion event in New England, he said.

In the US, when the "inevitable'' $50 billion event occurs there won't just be 10 small companies bankrupted like when Andrew, there will be hundreds of small companies and some of the largest in the land bankrupted.'' "The world is neatly divided. Outside the US there is an oversupply of capacity and rates will be driven down.'' Clearly the forces of supply and demand are alive and well as rates have dropped, he said.

The catastrophe supply is more in balance in the UK while supply exceeds demand in Australia.

There is a need for property catastrophe insurers to connect with capital markets, said Centre Cat president Mr. Charles Kline.

The solution will not come from the catastrophe reinsurance market, he said.

By accessing the $19 trillion US investment capital base, catastrophe ins insurers could narrow the US gap.

Mr. Kline, basing his conclusions on return on capital, said there is not enough insurance capital, too much reinsurance capital and not enough overall capital in the global property catastrophe marketplace.

"If insurers have sufficient capital they would not be purchasing the very significant levels of reinsurance they buy,'' he said.

There is a barrier preventing the excess capital from one area flowing to the peak zones, but government should not be the reinsurer of last resort, he said.

Some catastrophe insurers may try to displace other companies and ultimately drive rates down as completion increases, he added.

The phenomena of prices falling and capacity increasing, a situation which happened in 1980, is unlikely to occur again, he said of current market conditions.

In an extreme scenario such as a $100 billion US catastrophe, there is a $45 billion shortfall in capacity said PXRE Corporation president and CEO Mr.

Gerald Radke.

Mr. Radke defined capacity as enough coverage to handle an extreme event. He agreed that the capacity shortage answer will come from the non-insurance capital market vehicles.

Forms of non-insurance capital options may include commodity products from the CBOT, creation of special purpose corporations, broad surplus notes or specific reinsurance programmes.

Insurance needs to be more imaginative, he said.

He concluded more capital is needed, non-insurance capital is likely to be the solution.

He said there should be a government safety net for the mega catastrophic event which outstrips industry resources.

He also questioned whether or not there was sufficient capacity for UK flooding or windstorm in Japan.

These are areas with similar capacity problems to the US, he said.

"We wonder if there is enough cover for UK flood loss.'' Guy Carpenter & Company Inc. chairman and CEO Mr. Richard Blum, also said the answer may come from the broader based financial community.

This is still in the developmental stage but capital markets will play a role, he said. "The timing and format is unknown but I am certain we will see it soon.''