to carve a niche in the insurance business with an unorthodox investment strategy that hopes to emulate the success of another industry maverick, Warren Buffett.

The company has been set up by a group that includes former Finance Minister and current UBP deputy leader Grant Gibbons and former Centre Solutions president David Brown.

The company has filed papers for a $400-million initial public offering and list on the Nasdaq Stock Market. Buffett's Berkshire Hathaway Inc. made billions for shareholders by investing premiums in a few, select common stocks, rather than more conservative bond holdings that are more typical in the industry.

Gemini Re plans to stray even farther from the beaten path, entrusting 39-year-old money manager Philip Yang to seek higher returns by putting a significant amount of Gemini Re's portfolio in riskier futures, currencies, commodities and other financial contracts. Yang will serve as a top money manager for Gemini Re. "It is unusual to see an insurer use futures or any commodity-type thing,'' said George Morgan, a broker for Kirkpatrick, Pettis, Smith, Polian Inc., an investment bank in Buffett's home town of Omaha, Nebraska. Why do insurers generally avoid futures and similar investments? "Probably the volatility,'' Morgan said.

Indeed, financial contracts such as futures are known for big price swings that can generate huge gains -- or big losses. In its IPO filing, Gemini Re says it plans to focus its business on so-called "long-tail'' insurance specialties that typically don't require claims payments for many years, such as reinsuring medical malpractice, life, and worker's compensation insurance.

In that way, Gemini Re says, it hopes to have leeway to pursue riskier investments such as futures, currencies and swaps that, while volatile in the short run, promise higher returns over the long haul. In its search for more investment income, Gemini Re will largely rely on Yang, saying the money manager has developed trading programmes that produce annual returns of as much as 32 percent.

Better investment performance, the company said in its IPO filing, will let Gemini Re capture more reinsurance business by offering better prices to its clients. That could be an edge in a reinsurance market marked by fierce competition.

"Because of the strong financial performance of stocks and bonds and the (resulting) capital position of the insurance industry, demand for reinsurance has been falling,'' said Weston Hicks, an analyst at Sanford C. Bernstein & Co. Inc. "Reinsurers have been scrambling for ways to get growth, even competing with the primary industry.'' Gemini Re aims to carve market niche Reinsurers essentially are companies that provide insurance for other insurers. In return for a portion of the premiums collected by others, reinsurers assume some of the risk that insurance companies take on when they write policies.

The key for Gemini Re is matching the payments it must make under reinsurance contracts with the long-term nature of its investments. The company says it can withstand short-term losses on more-volatile investments if the securities and financial contracts don't have to be frequently sold to pay reinsurance claims.

"It's a great strategy in theory,'' said Vandana Sharma, an insurance analyst for Standard & Poor's Corp. "But the (insurance) markets aren't that simple.'' Reinsurers, like insurance companies, invest the cash flow from their operations in securities that will cover future claims payments and generate a return for shareholders. Most insurers and reinsurers, though, choose conservative investment policies.

The property and casualty insurance business had 19 percent of invested assets in common stock and 66 percent in bonds at the end of 1997, said Teri Watson, an assistant vice president at A.M. Best Co. an insurance rating organization based in Oldwick, New Jersey. And that stock percentage is high by historical standards because of the recent bull market.

Buffett, perhaps the world's best-known investor, altered the terms on this standard strategy for insurers by investing in a select group of common stocks he believed were undervalued. Berkshire Hathaway typically has kept about 75 percent of its assets in common stocks, according to Morgan, although that ratio changed when the company last month completed its acquisition of General Re Corp., the largest US reinsurance company.

Gemini Re, formed in December by Plimpton & Co., a private investment firm, also plans to follow an approach that breaks from the standard insurance investment formula. While the company will seek to place at least half its portfolio in highly rated bonds managed by an outside adviser, investment of at least 25 percent of the portfolio will be overseen by Yang, a deputy chairman of Gemini Re who owns a managed futures firm with about $890 million in assets under management.

Yang will allot some of the money to other outside managers and will invest part of the company's portfolio in three of his personal trading programmes.

These programmes will invest in futures contracts, options, swaps, currencies and agricultural commodities and will commit as much as 40 percent of their assets as margin for trading.

Yang's trading programmes have generated annual compound returns of at least 25 percent and one system has yielded an annual return of 32 percent since 1987, the filing said.

"We will endeavour to achieve significantly higher rates of return than insurance companies that follow a traditional investment strategy,'' the company said in its SEC filing. "These higher returns will allow us to price our products competitively and maximise shareholder returns.'' If things go according to plan, Gemini Re hopes to follow in the footsteps of Berkshire Hathaway. The Omaha, Nebraska, holding company produced an average return on book value of 23 percent through its investments in companies such as Coca-Cola Co. and American Express Co., according to Morgan. On the other side of the spectrum, though, is Normandy America Inc., an Omaha-based reinsurer that filed for an IPO in 1995. Normandy sought to capitalize on the reputation of Chairman Christopher Bagdasarian, a 30-year-old portfolio manager at the time whose investment style -- and claims of annual returns averaging 29 percent -- prompted articles proclaiming him as the next Buffett.

Normandy, though, unexpectedly withdrew its public offering in August 1995, one day after the shares began trading. And Bagdasarian pleaded guilty in November 1996 to fabricating his money management success.

Gemini Re will seek to sell an unspecified number of common shares for about $15 each, according to the registration statement. Underwriters for the stock sale will include Merrill Lynch & Co. and Chase Securities Inc.

Grant Gibbons