line. David Fox gives this analysis.

Lloyd's is predicting the possibility of more red ink for their 1998 and 1999 years of account.

Some observers believe that when that sinks into the consciousness of the world insurance markets, there will be more interest in reversing the free-fall in insurance and reinsurance rates.

Lines of business remain competitive but the strain on markets have not been so evident on the bottom line.

Chairman, president and CEO of LaSalle Re, Victor H. Blake, commented, "It's taken a little longer than one would like for the market to come back. But it seems there is some glimmer that is not so far off.

"I guess the interesting thing is that while I guess we all know the rates are technically too low in just about everything, as long as people are showing profits, it's very hard to make the case.

"I think that everyone is waiting for a trickle through of the reality to emerge. There is a glimmer here and there that suggest that maybe, it is not as far away as it might otherwise appear.

"It can be impacted upon by things like companies re-thinking reserve strengthening, where they thought it to be adequate previously. Companies may start finding more losses that need a bit more reserve strengthening.

"These factors will trickle through to the bottom line. People assume that a catastrophic loss is needed to turn the market. It is more likely going to be a combination of losses that emerge and gradually trickle through to the bottom line.

"Most of the companies are geared to take a big catastrophe, but maybe not two or three in the same year. One may not be enough. It will be some combination of things, that may not include a catastrophe, but just negative results coming through. Even expenses are a continuing issue, despite technology.

"With the consolidations taking place, these things all help to determine the bottom line. And there is some advantage in not having a huge past that might come back to haunt other companies.'' Meanwhile, there was more evidence recently of the maturing of LaSalle Re, as Wall Streeters who helped capitalise the Bermuda reinsurer, recently cashed their chips in and moved on.

Mr. Blake reported in the company's annual report that the sell off of the entire equity stakes in the company by some founding shareholders was an example of how LaSalle Re was growing up.

And as venture capitalists moved on, LaSalle Re was left with the stability of insurance industry sponsors, such as Aon and CNA. Still, while insurers collaborated with Wall Street in building huge blocks of the Bermuda market, it had been speculated that there would be a similar meeting of the minds in new investment capital for the securitisation of insurance risk. Little is being said about such initiatives, today. Mr. Blake was asked if the idea was losing momentum.

"It seems to have gone slightly out of fashion,'' he conceded. "Maybe with the competitive environment, some of the attraction of it is faded a little.

Perhaps some of the initial efforts to do it didn't quite go as planned. Maybe those who considered the idea are now moving on to something else.

"The financial houses were keen to see it happen, but they could only succeed if they find partners from the reinsurance side of the arena. Their natural bent is not in terms of such risk. They prefer a little more balance.

LaSalle Re maintains focus on profitability "That coupled with the competitive environment may have delayed the deal for the moment. They may have to look at it again when they feel the timing is more interesting, or they can find a more palatable variation of the theme.'' LaSalle Re is typical of the companies that came to Bermuda initially to write property catastrophe reinsurance. With a lingering softness in the market, there is no rush to write business at impractical rates.

As Mr. Blake notes, "We won't chase the rates down, but will keep our focus on making sure we stay profitable, even if we have to give up some of the premium.'' LaSalle Re is also typical because it has again posted great numbers in terms of underwriting profitability, taking advantage of the quiet years of no significant loss events.

LaSalle Re's loss ratio was 35.5 percent in its first full year of operation to September 30, 1995. And that dropped to 26.4 percent for 1996 and to 19 percent for last year. Expense ratios have also remained low, while the combined ratio over the last three years have come down from 52.6 percent, to 46 percent and finally last year 42.6 percent.

And the return on average equity, at 25.4 percent, was above twenty for the third consecutive year.

Said Mr. Blake, "In our first year, we were hit by claims from the Northridge Earthquake, and of course, it was our start-up year. The return on average equity is, by industry standards, twice as much as you would ordinarily expect. Even AIG, probably the world's most successful company, would be happy to have 12 percent. So 25 is good, but it is, of course, partially a function of the nature of the business.

"Who knows how hard the wind will blow next year. But when you do have a bad year, you know it immediately. There is no hiding from it and rates do tend to react. So you could have a bad year and then have a pretty good year.

"The sensible people look at it over ten year spans and then you wait to see how it all comes out. You expect to have lesser years and some very good years. Really, from the moment we were formed, we were bracing ourselves and of course, we didn't have to wait long with the earthquake.

"That is the charm of the business, in a sense. Although one knows that significant events are going to happen, one can't predict exactly when. It's good that we've had these few good years under our belt. We're better prepared therefore, to deal with the situation, when it occurs.''