has again warned that property catastrophe reinsurers, lured by strong results, are returning to the market with careless underwriting.

In his remarks to shareholders in the company's annual report, he said that the significant expansion into a down cycle will lead to an equal and opposite reaction at the cycle's next turning point.

His outlook was that: "PartnerRe will adopt a defensive posture while rates continue to decline. We will seek to maintain client relationships with companies that share our business values. We will seek to avoid writing business at terms which fall below a technically sound level.'' Mr. Haag recounted how large loss events in the period leading up to 1993 caused catastrophe reinsurers to close down or reduce their involvement substantially. Lessons had been learned about more careful underwriting.

But he said: "Now, as we reflect on the path the industry has taken since that time, it seems inevitable that these lessons will be forgotten and that mistakes will be repeated.

"The low loss burden in recent years and the successful emergence of the Bermuda reinsurers has caused established reinsurance markets to re-enter the catastrophe business with vigour, offering additional capacity in abundance.

"The resulting oversupply of catastrophe capacity, often offered at insufficient, even irrational, prices reminds us sadly that our industry continues to be led not by knowledge gained from experience, but rather by a desire for market share.

"The effect of such guidance is well known to many of us and will, unfortunately, claim its victims once more and therefore reintroduce volatility in price and available coverage.'' The competitive pressures in the catastrophe market have not left PartnerRe immune, but the company has maintained an internationally diversified book of business with the world's leading insurance companies, although North American business rose to a record 56 percent of its book in 1996.

Still one of the highest-capitalised reinsurance companies in the world, the increased competition in the market has led PartnerRe to determine that it is not the time for aggressive growth strategies in all targeted markets.

The year's loss burden was modest at 10.9 percent of premiums earned. Losses and loss expenses incurred for the year were $23 million, including provisions for losses resulting from Hurricane Fran last September and hailstorms in Canada last July, together with smaller events around the world.

A leading force in the global catastrophe reinsurance market, the reinsurer recorded a combined ratio of 25.6 percent, the best since its inception in August 1993.

Mr. Haag said: "During 1996 our capital base continued to grow substantially but market conditions made it imprudent to aggressively expand our business.

Rather, in today's excessively competitive environment, we have undertaken to manage our capital as a means to managing the reinsurance cycle.'' Total assets at the end of the financial year were $1,505,859,000 while shareholders' equity was $1,400,887,000. They compare with 1995 figures of $1,495,939,000 and $1,311,212,000, respectively.

PartnerRe declared net income of $249.7 million for the year to December 31, a 11.6 percent increase over $223.8 million for the year before.