Kymn Astwood. The number of companies registering here reflects that success.

Ahmed ElAmin reports Bermuda's insurance market is in the midst of a dramatic transformation as it evolves to meet the challenges of the future, Registrar of Companies Kymn Astwood yesterday told an international conference on captives.

New integrated risk products, the convergence of the insurance and capital markets, mergers and acquisitions, and greater use of technology are the main changes affecting the industry, he said.

The goal of a regulator is to adapt to the changes while maintaining the prime objective of protecting policyholders.

"Bermuda is the home for some of the most innovative insurers and reinsurers in the world, and the Island is playing an increasingly important role in our fast-changing environment,'' Mr. Astwood said.

He was speaking at the opening of the IBC 2nd Annual International Conference on Captives which runs until tomorrow at the Hamilton Princess Hotel. About 130 delegates are attending the meeting.

Captives are a type of insurance entity set up to underwrite the risks of a parent company or a group of related companies.

During 1997, Bermuda registered 93 new insurance and reinsurance companies, the fourth consecutive year in which formation activity was above 90.

"The number of new companies added during 1997 demonstrates the Bermuda market's ability to develop new products and attract business in a time of predominantly soft insurance markets,'' he said. "In addition, during 1997, Bermuda saw incorporations originating from many non-traditional markets such as Argentina, Brazil, Hong Kong, Japan, Mexico, Norway, Philippines and South Africa. In my view, these are some of the regions that are going to see the largest percentage increases in captive formations in the future.'' Part of the reason for the continuing growth of the Bermuda market was its response as an innovative, specialty market to meet insureds needs whenever traditional markets didn't respond. The market is responding to changing customers needs as corporate risk management continues to evolve.

"There is a move from managing only event risk, such as fires and accidents, to a broader mandate of protecting corporate assets and earnings from all forms of enterprise risks, which includes not only event risk but financial and business risks as well,'' he said. "...To address this need the Bermuda market is developing many more products that tailor long-term holistic risk solutions to a customer's specific world-wide enterprise exposures.'' Another related development is the securitisation of insurance risks through the use of capital markets. Bermuda is responding to the challenge through the formation of such entities as the Bermuda Commodities Exchange.

Another development is the use of "transformers'' -- special purpose vehicles that issue securities to investors and also provide insurance and reinsurance capacity using the funds generated.

For example in March this year international investment firm Goldman Sachs formed Arrow Re, a transformer vehicle. And Bermuda-based Centre Solutions was the first company to execute an insurance securitisation deal in 1998.

To facilitate this evolution Bermuda amended its insurance legislation in a bid to help make the Island the leading market for this convergence.

"The main purpose of the Insurance Amendment Act 1998, which is the first of its kind, is intended to remove any uncertainty as to whether an investor in, for example, a catastrophe bond, is engaging in insurance,'' Mr. Astwood said.

A special committee has also been established to make recommendations on how Bermuda's regulatory system needs to adapt over the next three to five years.

The Island is also leading the way in developing technology for the industry.

Bermuda Connect, a private secure E-mail network, is being used as a means of communication among industry players.

"In addition, we are currently testing a custom built Lotus Notes application that will enable us to receive applications for regulatory approvals electronically and process them more efficiently by making greater use of technology,'' he said.

An Internet site for electronic commerce has been developed which allows service providers to reserve company names on-line and submit statutory financial returns. The site is being deployed through Bermuda Connect only, until Internet security concerns are addressed.

Another innovation, The Bermuda Insurance Data Services, is being designed as a system to allow brokers around the world to submit bids on a secure Web site.

"As the chief insurance regulator of the Bermuda insurance market my prime objective is to protect policyholders, while at the same time ensuring that our regulatory system makes sense from a business perspective as well as a regulatory perspective,'' Mr. Astwood said. "Bermuda's shared regulatory system has the necessary tools, techniques and expertise to achieve this objective and accommodate the private sector innovation that has made the Bermuda insurance market what it is today.'' ADAPTING TO CHANGE -- Kymn Astwood, Registrar of Companies GOVERNMENT GVT BUSINESS BUC