companies from Bermuda hotels could be lost from the domestic market if a new venture succeeds in its stated intentions.

But the proposed exempted insurer is expecting the Bermuda Government, in an unusual move, to waive the prohibition on such companies writing local risks.

To be sponsored by Centre Reinsurance (Bermuda) Ltd., Aon Corporation and the Caribbean Hotel Association (CHA), a holding company, Speir Fe m Holdings Ltd.

is to be organised under the laws of Bermuda to operate through its Bermudian subsidiary, CHA Insurance Company Ltd.

CHA Insurance would offer primary "all risks'' commercial property insurance to hotels that are members of associations belonging to the CHA.

That would mean that Bermuda Hotel Association (BHA) members could also be insured because the BHA is a CHA member.

BHA executive vice president Mr. John Harvey said: "There was a thrust, particularly from our smaller members to try and seek an insurance carrier who would be willing to insure them, because the rates were going up astronomically.

"At the same time, the CHA was investigating thoroughly doing something for all of its members.'' The CHA insurance consultant in Puerto Rico said that although the company was originally envisaged as a Bermuda captive, it is now being set up as an exempted insurance company.

The company would apply for status from the Minister of Finance under the Exempted Undertakings Tax Protection Act 1966.

The holding company is now trying to raise up to $25.1 million through the a private placement with Dean Witter Reynolds Inc.

The shares will not be registered with the US Securities and Exchange Commission. The issue and transfer of shares are subject to Bermuda Monetary Authority (BMA) permission. The shares are not available to Bermudians, or anyone else resident in Bermuda for foreign exchange purposes.

The company is being formed "to capitalise on underwriting opportunities in the Caribbean and Bermuda hotel property insurance market that exist due to market inefficiencies'', says a private memorandum. The company, which was originally scheduled for start up last month, was to have had 20 percent of the shares held by the three sponsors, with accredited investors eligible for what remains out of the 251,000 shares at $100 a share with a par value of $1 per share.

The new company was looking to capitalise on a Caribbean market wracked by the depletion of more than $40 billion of property/casualty industrial capital.

Catastrophic coverage premiums and deductibles have been pushed up by companies still in the market by as much as 300 percent in some areas.

Caribbean hoteliers are experiencing "restrictive policy terms and conditions, volatility of pricing by insurance competitors and a limited choice of high quality insurance companies''.

The new company is being formed to address the Caribbean hoteliers' need for less volatile, more rationally priced property insurance.

The company proposes to provide an "all risk'' alternative property insurance policy to a market of 900 CHA hotels, and provide a CHA endorsed product, with the option of multi-year policies, broader coverages, and priced according to their individual exposures, as opposed to those worldwide.

The hotel market is said to cover 29 islands and exceed $10 billion in insurable values.

The company would also offer credits for favourable loss experience and capacity and coverage stability arising from multi-year and adequately reinsured support, product features that the memorandum claims is not typical of what is normally provided in the Caribbean.

The company would initially only retain windstorm and earthquake catastrophe risks.

Centre Re and Centre Cat Ltd. would provide reinsurance on the catastrophe perils above the company's retention layer. The all risk policy will still mean that the company is only exposed to windstorm and earthquake catastrophes.

The company is to benefit from the favourable Bermuda tax environment and will pay Aon subsidiaries in Bermuda $1.4 million to $1.8 million a year for the first five years.