invest in the insurance and reinsurance business see Bermuda as an efficient and ideal offshore location for such special purpose ventures. A new enterprise aimed at capitalising on the convergence of the reinsurance and capital markets, through broker-driven business, is up and running.

New Class 3 Bermuda reinsurer, Arrow Reinsurance Co. Ltd., with the benefit of private legislation, intends to act as a transformer by facilitating the transfer of reinsurance risk to the capital markets, through the issuing of securities, or entering into derivative contracts. Although independently operated, Arrow Re is owned by New York-based Goldman Sachs Group, L.P., an international inbanking/securities firm.

Arrow Re will run a matched book of business where their reinsurance contract on one end is transformed to a contract hedged by the issuance of a security or the execution of a derivative issue on the other end.

Capital markets have been focused on peak exposures, those that the market in past years did not have all the capacity for, such as east coast hurricane and California quake risks.

Arrow seeks to take advantage of Bermuda's respected business environment, a well-established infrastructure and studious interest here in turning the theory behind securitization of risk into a reality.