Competition in insurance is taking on more of a global perspective than ever before and is now affecting the Bermuda market, warned Starr Excess Liability Insurance Co. Ltd. chairman, president and CEO, Joseph C.H. Johnson in the 1996 Starr Excess annual report.

The report describes an "increasingly competitive and at times irrational'' marketplace and an expectation that 1997 will be "even more turbulent''.

While declaring record profits of $28,801,000, up 32.7 percent from 1995 and more than three times the $8.2 million in earnings declared in the first full year of 1994, Mr. Johnson stated that 1996 saw the most difficult trading conditions since the 1980s.

The report's corporate overview forecast a market correction noting: "The global insurance industry cannot afford to continue to cut premiums in pursuit of market share, particularly as the year-on-year trend in claims is an upward one. The question is, therefore, not so much "if'' the correction will come, but "when''.

"At the time of writing this report it is difficult to predict the circumstances that would bring about such a dramatic change, but we do know that at the excess liability level it would have to be a number of catastrophic claim events in reasonably quick succession.

"While statistically possible, it is unlikely and we therefore expect the present competitive cycle to continue well into 1997 and possibly beyond.'' Mr. Johnson said, "European and London insurers are rebuilding their capacity which disappeared so abruptly in 1984 and 1985. As a consequence, Bermuda insurers will need to find new and innovative ways to maintain their share of business.

"How the industry here in Bermuda deals with these market changes will be one of the most interesting areas to watch in 1997.'' Mr. Johnson said that Starr Excess will approach such a market by building on their successes toward the long term objective of establishing a sound and successful company.

The company will continue to develop a sustainable underwriting policy, maintain a prudent loss-reserving policy and "avoid the temptation'' to diversify into non-core business lines.

Market correction imminent, Starr Excess chief warns "Instead,'' he said, "we will build upon those opportunities within our chosen classes. We are far from reaching a saturation point and are well positioned to achieve continued success.'' Starr Excess entered into the excess professional liability market last year, writing $4.4 million in premium. The company also had $4.6 million in excess D&O premium, together with $100.6 million in excess liability for combined gross written premium of $109,557,000.

Assets grew $215.5 million, or 67.4 percent, year-over-year to $535,441,000.

Liabilities rose some $88 million to $272.2 million.

Shareholder's equity rose a staggering 94.1 percent to $263.2 million.

The company's loss ratio continued at 80 percent. The company has adhered to a conservative reserving policy, with year-end "incurred but not reported'' (IBNR) loss reserves moving to $203 million.

The combined ratio was 96.7 percent, relatively unchanged from the year before.

The report's performance review stated that the high excess market is marked by increasing available cover and falling rates, with terms and conditions expanding to meet competitive pressures.

Of The Financial Times 500 companies, Starr Excess writes 52 percent of the oil companies, 34 percent of the drug and health care manufacturers, 33 percent of the automobile manufacturers and 27 percent of the chemical companies.

More than a quarter of the premiums in 1996 came from non-US territories. The company is targeting the Far East in 1997, after a year of writing business in South America, Europe, Africa, the Middle East and Australia.

The US market represents nearly 75 percent of total premium. The UK is the largest non-US market, attracting $10.8 million in premium, or 9.9 percent of total premium.