The continuing pressure on rates and margins will, at some point, interrupt a consecutive string of record earnings for Bermuda-based finite risk reinsurer, Scandinavian Re, president and CEO Jens Juul has noted.

But he countered, "It may well be this precise rate situation that will be most beneficial to us in a few years as we continue to grow our capital.'' The downward pressure on rates forced the loss of business from some longstanding clients of the Class 3 company, but the company has responded with the restructuring of some products and the addition of others.

Writing in the company's annual report for the year to December 31, Mr. Juul said, "In some cases, the emphasis had to be put on economical up-front premium terms with aggressive additional premium triggers.

"While these changes do not alter the total economics of a solution, they certainly impact our income statement. These products give the client flexibility in being able to cancel and commute a cover prior to year-end, i.e. at a time when the client will have a fairly good idea as to what the need for the cover is likely to be.

"This allows clients to avoid ceding significant additional premiums, however it does reduce our reported net writings. Amended structures may sometimes also force the earnings recognition to change from the premium line to the fees earned line. This has had a positive effect on Scandinavian Re's reported fee income.'' With changing market conditions and significant growth in the firm's capital, there has been an increase in the firm's risk appetite.

Scandinavian Re and Bermuda-based insurer and reinsurer Terra Nova have launched COFRSURE for the provision of certificates of financial responsibility (COFR).

The certificates are issued by the US Coast Guard to ensure that in the event of an oil spill in US waters by a visiting vessel, the ship's owners have the proven financial wherewithal to pay for the clean-up.

Scandinavian Re was authorised by the US Coast Guard to issue financial guaranties, while Terra Nova and its subsidiary Octavian Syndicate, jointly with other Lloyd's syndicates, assume the majority of the risk.

And in a new venture, Scandinavian Re has also arranged for an insurance solution covering the third party pollution liability exposure arising from the waste sites of a large US county.

Mr. Juul added, "On the reinsurance side, we created a variety of aggregate excess of loss covers. These solutions are designed to give the ceding company an effective tool for result stabilisation, through whole account covers, that essentially migrate the burden of IBNR (incurred but not reported) reserving claims development over to us. "These products can enable publicly owned clients to increase their net income per share, resulting in increased stock values.'' Scandinavian Re declared net income of $22,651,000 for the year, a 26.7 percent improvement over the year before.

And for the ninth consecutive year, the firm has reported an underwriting profit -- a record $6.1 million, up nearly 15 percent over the year before.

The result came even though net premiums rose a modest 3.9 percent to $42.9 million. Fees earned grew 18.9 percent $5.3 million. Year end assets were $786 million, while capital & surplus was $311 million.