Bermuda-based international re/insurance company Catlin Group Ltd. intends to establish a new reinsurance company in Switzerland — but the company has said it will maintain its headquarters in Bermuda.

The move is intended to strengthen the company's presence in the European market and the new Zurich-based operation will be a subsidiary of Catlin Bermuda.

Catlin Re Switzerland will have $1 billion of capital provided from within the Catlin Group. Catlin said it will also apply to the Bermuda Monetary Authority to open a Bermuda branch of Catlin Re Switzerland. This branch will initially write the book of reinsurance of other Catlin subsidiaries that is currently underwritten by Catlin Bermuda.

However, the company said Catlin Bermuda will continue to write the entire portfolio of open market insurance and reinsurance business that it currently writes.

A Catlin spokesman said yesterday: "We believe that this development reaffirms Catlin's commitment to Bermuda."

Catlin chief executive officer Stephen Catlin said in yesterday's statement from the company: "Our ambition is to build Catlin Re Switzerland over time to become a leading European specialty reinsurer.

"The specialist classes of business to be initially underwritten by Catlin Re Switzerland will expand the portfolio of similar business now written by Catlin by focusing on high-quality European risks at a time when market conditions are favourable for these business classes."

Mr. Catlin added that he expected the unit would expand over time and write additional lines of business. It would also offer the group additional capital flexibility, he said.

Catlin already has ten European offices in Cologne, Zurich, Antwerp, Barcelona, Bergen, Genoa, Innsbruck, Munich, Paris and Rome. These offices, which wrote $175 million in gross premiums during 2009, will all come under the wing of Catlin Re Switzerland.

The company added that the new unit would help Catlin to take advantage of new opportunities arising as a result of the new Solvency II rules being introduced by the European Union in 2012.

The new rules are set to increase capital requirements and raise the bar for standards of corporate governance and transparency for insurers doing business in the European Union.

Bermuda's insurance regulator, the Bermuda Monetary Authority, is working on enhancing its regulatory framework to earn equivalency with Solvency II, to ensure that Bermuda companies doing business in the EU are not competitively disadvantaged. Switzerland, which is not an EU member state, is also seeking equivalence.

The fiercely competitive European market is dominated by the world's two biggest reinsurers Munich Re and Swiss Re.

Several other reinsurers have taken steps to beef up their European presence over the past couple of years. Class of 2005 Bermuda start up Flagstone Re moved its underwriting headquarters to Switzerland and its holding company to Luxembourg as it tried to "establish its identity as a European company".

Two months ago, Catlin's Lloyd's market rival Amlin set up a dedicated Swiss-based subsidiary, staffed by a team of underwriters recruited from reinsurance giant Swiss Re. Novae, another Lloyd's insurer last year also set up a reinsurance unit, targeting the European market from offices in London and Zurich.

Catlin has applied to the Swiss Financial Market Supervisory Authority for permission to set up its new venture and expects to get clearance in the second half of 2010.

Catlin announced that Paul Brand, the group's chief underwriting officer of the Catlin Group, will assume the additional role of chief executive officer of European Operations. Reporting to Mr. Brand will be Ralf Tillenburg, currently CEO of Catlin's European hub in Cologne, who will become CEO-European Direct, as well as a CEO-European Reinsurance, whose appointment will be announced soon.

Catlin's European insurance operations will report to Mr. Tillenburg, while the CEO European Reinsurance, who will be based in Zurich, will be responsible for Catlin Re Switzerland as well as the existing reinsurance operations of Catlin's European offices.