options coming in the future, the chairman of Bermuda's Insurance Advisory Committee (IAC) Brian R. Hall has predicted.

Mr. Hall, the president of Inter-Ocean Management Ltd., made the prediction in Nassau during a speech to the Bahamas Silver Anniversary of Offshore Financial Services Conference.

He said, "We are seeing already the merging of many of these new service providers to create capacity and competencies to add value to the world's largest corporations.

"There will be no defined boundaries between risk classes or annual renewals, with multi-line, multi-year coverages already being offered. And this is just the beginning.'' He remarked how in just 12 years, Bermuda-based insurers EXEL Ltd. and ACE Ltd. had become larger than most global insurers which have been in existence for more than 100 years.

Mr. Hall said, "New visions, imperatives and dynamics have driven this meteoric growth. Even in a soft market, captives have benefited from this growth, with a broad range of options.

"Owners have a much greater awareness of change in risk profiles. The numbers of captives grows every year globally. Many are diversified into many lines of coverages, in several locations.

"With the mergers of corporations, so captives are merging to create new levels of capacity available to their combined owner.

"Integrated within the corporation at a much higher level than ever before, strategies are being developed to utilise the captive and the alternative risk market to provide new profits to the owner -- for example, in extended warranty, credit life, etcetera.'' Modern technology allows insurance offers to be proposed, rated and bound electronically over the Internet 24 hours a day.

"In fact,'' he noted, "Swiss Re are already promoting the concept of `the virtual insurance company!' Now that could be a regulatory nightmare!'' Electronics have made transactional capabilities lightning fast and mega-mergers are happening like never before, where service providers and markets need to create capacity to meet mega-needs.

Mr. Hall said, "We have trained, and need to train an army more, people to be adaptable and flexible, to respond to the new global imperatives.

"So the world I leave you with, as everything moves faster and the millennium arises before us, is change .'' He said the entire worldwide insurance and reinsurance market has dramatically changed its definition of risk.

"As it has always been,'' he said, "for the corporation seeking to protect its business leadership, it is keen to protect its financial exposure to loss.

There are tangible exposures where it is easy to quantify and insure against loss, such as property, business interruption, general liability and the like.

"However today, we see a much greater concentration and imperative regarding the intangibles in the balance sheet. Things like contingencies; EPS (earnings per share); reputation as a responsible global citizen; reputation and integrity of products; market fluctuations; and, shareholder confidence.

"All of these exposures can now be covered by an array of alternative risk facilities.'' There has also been a redefinition of markets, with dramatic mergers within the insurance industry, and between financial institutions and insurers.

The notable merger between Travelers and Citicorp underscore the magnitude of the shift and is a sign of the times, as the capacity of the capital markets -- at least ten times the insurance market capacity -- is being mustered behind risk needs and positions.

It raises the question of whether the future market will be major insurers or banks. Mr. Hall continued, "Then of course, many of the large corporate buyers, when they examine their balance sheet, find it is far more substantial and stable than the markets they buy their coverages from.

"Is there a case to be made here for greater retention of risk by the corporation, rather than the transfer of risk to underwriters that may not be able to respond when needed in the future? "Then there is the question about the competent service providers. Is the most suited a broker, which traditionally has served as the intermediary between the insured and the insurer, or is it the consultant which professes to be all things to all people, or is it the investment house, which can assemble capital responses to the management of risk? "Or is it a combination of all three, utilising the skills of each that complement the needs of the corporation?'' Meanwhile, Mr. Hall noted that some offshore domiciles that have sprung up have been extremely successful, while others are still finding their niche in the offshore captive world.

The successful ones have benefited from their geographic location, tax and regulatory advantages, regional partnerships and a sensible level of confidentiality.

The veteran insurance man emphasised that `accommodating legislation' that is required for such domiciles, does not mean that deals can be done with regulators or oversight is conveniently minimised.

BRIAN HALL -- "There will be no defined boundaries between risk classes or annual renewals.''