Top analysts discussed the direction of Bermuda insurers and reinsurers in the just-published Annual Non-Life Insurance edition of The Wall Street Transcript.

The investment minded review is an in-depth roundtable forum featuring four distinguished analysts: Joseph Barone of The Firemark Group, James English of J.P. Morgan Capital Corp., Michael Smith of Bear, Stearns & Company, and Susan Spivak of Donaldson, Lufkin & Jenrette.

The panel discusses Bermuda companies, diversification strategies, pricing cycles, merger and acquisition trends in the sector, the growing performance gap between the stronger and weaker players, and debate this year's 300 percent rise in insured catastrophic losses.

Mr. Barone says, "I think one of the major impacts this year is the number and size of catastrophes we've had for the first nine months of this year, which caused over $8 billion in insured losses.'' But Mr. Smith said, "The quick excuse is that catastrophe losses this year have been much more severe than last year.

"But when we strip out the catastrophe losses from the numbers, what we find is that companies are still coming up short in comparison to estimates, and we're seeing expectations for next year lowered.'' Companies are choosing divergent paths as they strive to increase shareholder value and stock prices.

Mr. Barone asserts, "Within the insurance industry, two basic strategies continue to unfold -- wide diversification of financial services versus a refocusing along core lines of business.'' Advising acquisition over internal restructuring, Ms Spivak states, "I view diversifying through acquired rather than organic growth as in the best interest of shareholders.

"We look to the Bermuda market as an excellent example of how the implementation of a successful diversification strategy can enhance shareholder value.

"As competition intensified in core excess liability and property-catastrophe lines, companies used mergers and acquisitions to offset declining premium volume and quickly build a presence in new geographic markets and product lines.'' Bermuda companies mentioned in the report include Ace Ltd., Exel Ltd., PartnerRe Ltd., American Safety Insurance Ltd. and Terra Nova Holdings Ltd.

The panel also addresses securitisation, Internet insurance sales, banking and insurance integration, globalisation and a future outlook.