core infrastructure for the development of widespread trading and distribution of securitised insurance products, insurers were told yesterday.

And Bermuda Stock Exchange (BSX) CEO William Woods also pointed out that the Island was blessed with the best reinsurance minds in the world, and a regulatory environment that enabled the development of a market for the securitisation of risk.

Bermuda's profile in risk trading is about to go much higher, with a number of initiatives coming online to supplement and augment recently announced trading developments at the BSX, he said.

"The talent is here to make it all happen,'' he remarked.

The BSX CEO provided some insight into the convergence of the financial and insurance markets, during a presentation at a Bermuda Insurance Institute monthly luncheon, yesterday.

His speech was entitled "Converging or Colliding? A discussion of the narrowing gap between financial service markets''.

Already this summer, the FTSE/BSX Bermuda Insurance Index was launched, based on the stock market performance of ten of the most prominent Bermuda-based insurers and reinsurers, weighted according to their capitalisation. It was followed within weeks by the launching of the Bermuda Insurance Index Fund, which allows individuals another way of participating in the success of the Bermuda insurance market, apart from the direct purchase of company shares.

"In the near future,'' said Mr. Woods, "we hope to have a traditional options contract based on that index. That options contract then becomes another instrument which can be used to hedge against the rise or fall of the equity prices of the companies within the index.'' But within the next two weeks, the BSX will introduce special new listing regulations for insurance-related securities.

He pointed out: "The idea behind the regulations is to create a new unique position for the Exchange, as being the only one in the world that has listing regulations specifically targeted toward these new insurance securitised products.

"We've adopted a definition on insurance-related securities that applies to any security which has a value that is related to an insurable event or an `Act of God'.

"That's a wide definition that gives us a lot of scope as products evolve.'' It is important that the BSX issues a listing service because many of these instruments are only issued to institutions and high net worth individuals, where the minimum investment is high.

In that market, such institutions are restricted in how much they can invest in unlisted securities. Increasingly, investors are asking that the investment instruments be listed.

So the distributors are generally looking for a place to list them quickly, conveniently and inexpensively.

Said Mr. Woods: "That is exactly what we at the BSX are aiming to provide. We ultimately should become the stock exchange of choice for listings of those instruments.'' The BSX is also expected to soon have a live product in the electronic trading of risk in CATEX Bermuda, a joint venture between the BSX and the Catastrophe Risk Exchange in New York, which provides a platform by which risk can be traded electronically.

The BSX CEO dubbed CATEX Bermuda "The Insurance Market of the 21st Century,'' providing for trading over-the-counter traditional insurance contracts or products like swap contracts.

Legislation already in place bypasses certain restrictions, in effect removing any question of whether or not contracts on CATEX are tradable. Both insurance contracts and non-insurance business can be traded.