Bermuda's ART (Alternative Risk Transfer) and property catastrophe reinsurance markets could explode once US insurance companies realise they have insufficient reinsurance cover.

"There's not a single insurance company in the United States that is currently adequately reinsured,'' Mid Ocean Re president Mr. Michael Butt told the eighth annual International Reinsurance Congress at the Princess Hotel yesterday.

The more than 200 industry members attending the Congress heard how the Northridge earthquake "shook up'' primary insurers.

It had reminded them of the need to buy property catastrophe cover at far higher limits than once thought.

Mr. Butt said the estimated insured loss for the California quake, which now stood at $9 billion to $12 billion, looked like it was going to be ten times the original estimate.

Mr. Butt further pointed out that scientific evidence showed the frequency and severity of catastrophic disasters like earthquakes and hurricanes would only increase.

Thus the demand for the type of property CAT reinsurance offered by companies like Mid Ocean Re would more than likely rise.

He noted the CAT property market brought almost $4.5 billion in new capacity to the Island over the last year and a half.

The Island's flourishing ART and CAT property markets were causing Bermuda to be considered internationally as a mature market affording a sort of "one-stop insurance shopping'' with its alternatives to traditional insurance, he said.

The high quality of life here was added bonus to attracting new business, giving Bermuda a "significant advantage'' over the competition, Mr. Butt said.

"The quality of life here recruits high-quality people,'' he said. Mr. Butt noted the local market had grown from zero in 1980 to around 35 percent of the world market.

The booming market caused some insurance professionals to raise concerns during a panel discussion that industry regulators needed to consider forcing "complete disclosure of financials'' of ART and CAT market companies to ensure against any fly-by-night operations.

One professional said he could see the need for confidentially for Bermuda's captive market, however, he saw "no need at all' for confidentiality in the CAT market.

Registrar of Companies Mr. Malcolm Butterfield said Bermuda was not currently considering such a move but would "certainly look at it'' in the future as one of its options in regulating the industry.

He noted: "From Bermuda's perspective, confidentiality is one of the cornerstones of our success and we are certainly not going to throw the baby out with the bath water.'' Mr. Butt responded that given the global market it made good business sense for companies to go at least three-quarters of the way to full disclosure of financials.

Johnson and Higgins senior vice president Mr. Roger Gillett said the reason for the success of the ART and captive markets was that large insurance buyers today had "a strong desire to control their own destiny''.

"They do not know what happened to the insurance market in the mid-1980s but they'd rather not face the same situation again,'' Mr. Gillett said.

"They want to reduce their reliance on the traditional insurance markets, lower their long term risk.'' Traditional insurance was apparently no longer the way to finance unexpected losses.

Mr. Gillett said in his opinion traditional insurance might as well now be called "the alternative''.

Despite the new directions of the market, he added: "Captives remain by far the most popular option to the large insurance buyer.'' However, their role was changing significantly.

"We must more clearly identify what the client wants from us,'' he said, adding the attitude that "this is my product, take it or leave it'' must go.