Plans to create a Bermuda Insurance Exchange have been put to Government, Flagstone Reinsurance Holdings Ltd. chairman Mark Byrne revealed yesterday.

During a panel discussion on the attempts to resurrect the New York Insurance Exchange (NYIE) and what that could mean for the Bermuda and London markets, Mr. Byrne said he thought Bermuda had a better chance than the Big Apple of making such an entity work.

But he added that any such plans for the Island should remain on hold, if New York pushed ahead with its plans.

During the first session at the inaugural Bermuda Reinsurance Club event, staged by Reinsurance magazine, the consensus view on the panel was that the NYIE plan faced huge obstacles and would have to offer significant advantages to lure industry capital away from the likes of Bermuda.

New York wants to set up its exchange as something similar to the Lloyd's model. Lloyd's is effectively a society, whose underwriting is done by its members, with the market based in Lime Street, London.

A previous attempt to establish the NYIE in the 1980s ended in failure. Former New York Superintendent of Insurance Eric Dinallo, a long time proponent of its revival, believes it could attract business from Bermuda.

US industry executives are working in groups with the aim of producing a plan for the NYIE to be ready by September and for the Exchange to open by 2011.

Mr. Byrne said he had suggested the idea of a Bermuda Insurance Exchange to Government more than a year ago.

The idea was to flesh out the concept in a feasibility study and find a few partners to be owners of the Exchange. "Among the Bermuda companies, I'm optimistic that we could raise $200 million in equity capital", Mr. Byrne said. It was important that one of the largest Bermuda companies was among those involved, he added.

"I don't think we try to do it in the teeth of a New York initiative," Mr. Byrne said. "Two exchanges starting out at the same time would be a negative thing, so we would stand aside."

Finance Minister Paula Cox opened the half-day event at the Fairmont Hamilton Princess with upbeat comments on the Island's insurance sector. She also said the Island had a "cluster effect" that allowed those involved in the industry to find all they needed — insurers, brokers, law firms and other service providers — by walking barely more than a block.

Mr. Byrne said the cluster factor was an important advantage for Bermuda over New York, in an industry that still generally preferred the face-to-face way of doing business.

Brad Kading, president of the Association of Bermuda Insurers and Reinsurers, said the idea of a Bermuda Insurance Exchange had not been widely discussed among his members and there were "people on different sides of the fence".

John Daum, executive director of broker Lockton Re North America, was highly dubious about the NYIE's chances of success. He believed it was a politically-driven initiative to create jobs.

One of the intended plus points of the NYIE would be if it allowed participants to write business in all 50 US states, each of which has its own insurance regulatory body. "Would the Insurance Department of California give the right to New York to regulate its risk?" Mr. Daum asked, suggesting that it would probably not be happy to do so.

Sharon Angelino, a partner and insurance expert at US law firm Goldberg Segalla, said the NYIE could only be attractive if it offered real value to participants through efficient technology, 50-state access and a competitive tax rate. "The quid pro quo would be rigorous supervision," Ms Angelino added.

Matt Mosher, AM Best's senior vice-president of ratings, said the 50-state access would be a "big selling point" for the NYIE. "The key is to use the right technology and it's going to take a while to have the individuals in place to run it," Mr. Mosher said. "The second challenge is whether it can be more efficient that what we have here in Bermuda and in the London market already."

Mr. Byrne believed it would take at least two years before a team could establish an NYIE. He added: "Insurance capital is very nimble. "People are not going to put capital in the Exchange until the Exchange is working. They have got to find investors with at least $10 million for that venture capital stage."