The insurance and reinsurance operations at Hurst Holme on Trott Road in Hamilton, long known as Sphere Drake Underwriting Management (Bermuda) Ltd.

(SDUMBL) officially began trading as Odyssey Re Bermuda yesterday.

SDUMBL was Sphere Drake Ltd.'s Bermuda underwriting arm for alternative risk transfer (ART) business. It complemented the firm's London operations which are now called Odyssey Re (London) Ltd.

The Bermuda and London underwriting offices now come under Odyssey Re (Bermuda) Ltd.

The changes mark Sphere Drake's departure as an often troubled company in the midst of highly-capitalised and very successful Bermuda companies, with its purchase by Toronto-based Fairfax Financial Holdings Ltd.

Sphere Drake has long been seen as somewhat of an anomaly of the Bermuda industry, with long-held market concerns about the quality of its balance sheet and financial flexibility.

It was a company on the other side of the tracks from Bermuda's top insurers and reinsurers. It will continue operations, perhaps with a new attitude and at least with a new profile, from the same city office space.

But now, together with group partners -- Odyssey Re Corporation of New York and Paris-based Compagnie Transcontinentale de Re m assurance -- the former Sphere Drake's Bermuda and London operations enjoy the benefit of a billion dollars in capital and surplus and `A' rated paper (S&P rating `A'-minus).

That rating came last December after the Fairfax deal was completed, an improvement over Sphere Drake's former triple-`B' rating.

Sphere Drake Holdings Ltd. was a troubled London market property insurer and reinsurer in 1987 when insurance investor John C. Head III took control for $60.6 million, his first major deal.

In the early 1980s it was caught up in the "gang of four'' scandal in London when it was being used by another company to funnel money offshore.

In 1993, the company, which had since based its operations in Bermuda, had an IPO which raised $136.7 million. It was writing specialty lines of property and casualty insurance and reinsurance.

The company's most recognisable figure in Bermuda was Jonathan Crawley, who retired in 1996 to Gers, the French agrarian region in Gascony. His departure came as the company that February reported a near $50-million loss for the fourth quarter and a net loss for the 1995 fiscal year of nearly $18 million.

The ART business written in Bermuda was down 27 percent for the quarter, as net premiums written for the year fell six percent to $48 million.

It came as loss reserve strengthening for the 1995 year was $87.7 million as a result of adverse experience on the company's excess-of-loss reinsurance lines. An additional $10 million was added to strengthen reinsurance recoverable reserves.

Nearly $100 million worth of reserving-bolstering later, the $250-million company was still worth $247 million.

In 1996, a serious dispute that had been simmering led to Mr. Head, the company's largest individual investor (6.9 percent), resigning from the board at the end of April as he called for a probe into "alleged transactional irregularities''.

The same dispute, it was reported, had led to Ian H. Dean resigning as president and CEO the December before.

By August 1996, with falling second quarter profits, the company exited oil and energy insurance which had suffered a decline in rates. The soft market and some adverse experience had begun to catch up to Sphere Drake.

That November the firm said it would withdraw from more insurance business, including unprofitable marine insurance. It sold its Liverpool, England-based yacht and cargo underwriting agency, Groves, John and Westrup and was negotiating to sell its protection & indemnity (P&I) business, eventually sold to HIH Winterthur Insurance Group in February 1997.

Sphere Drake said it would no longer sell reinsurance for hull and cargo, but focus on property excess-of-loss, marine and aviation excess-of-loss, casualty and ART reinsurance, and its US excess and surplus lines of specialty insurance, as well as UK and European property insurance.

New president and CEO, Michael Watson said the restructuring was separating the company's checkered past from future operations. It meant significant global staff cuts (150 out of 450) and a $15-million charge.

Sphere Drake was becoming more conservative in its underwriting, a philosophy long subscribed to by other companies in the Bermuda market. But it came as rates continued to soften unabated. Premiums plummeted, including the ART business written here.

TRANSFORMATION -- Sphere Drake took on a new look and attitude.