The class of 2005 reinsurers who set up in response to a spike in demand after Hurricane Katrina may start to disappear as some institutional investors seek to pull out their money.

That is the view of Franklin Montross, the chairman and chief executive officer of General Re, one of the world's top five reinsurers, who made the comment at the Euroforum reinsurance conference in Zurich last week.

According to the Dow Jones news wire, Mr. Montross and others at the conference said they expect some of these companies formed nearly five years ago to disappear, because the private equity and hedge fund investors that gave them the cash to set up in business, need their funds elsewhere and are disappointed about the poor returns on their investment.

"The private equity investors want to get out," Mr. Montross said. "I think we are at a critical juncture now, and there is less capital flowing in."

Karl Mayr, CEO at Axis Re Europe, a subsidiary of Bermuda-based Axis Capital, said at the same event in Switzerland that while it is "fairly obvious" that private equity investors want to get out of their reinsurance holdings, it is also obvious that it isn't easy to exit these investments.

Bermuda saw much of the new capital to enter the industry after the devastating 2005 hurricane season, which brought hurricanes Rita and Wilma, as well as Katrina.

Among the class of 2005 companies to set up in Bermuda were Validus Holdings, Flagstone Re, Harbor Point Re and Ariel Re. Two of those four have already been involved in huge merger deals. Validus took over IPC Holdings last year in a $1.7 billion deal, while Harbor Point Re entered into a "merger of equals" with Max Capital Group earlier this year to form a new Bermuda company, Alterra Capital Holdings.

Yesterday, Flagstone's share price closed at $10.80, well below its diluted book value, which was $14.25 at the end of the first quarter of this year.

That is typical in the property and casualty re/insurance industry right now and a reason why some major investors may be itching to move their money elsewhere in search of better returns.

Although Bermuda's class of 2005 reinsurers have all been successful in adding to their book value and growing international underwriting platforms — despite the high catastrophe losses and the plunging assets values of 2008 — their success has not been reflected in their share prices.

More seasoned reinsurers are also trading well below book value. Many have responded with huge share repurchase programmes, designed to optimise value for shareholders. RenaissanceRe, for example, spent $200 million on buying back its own shares during the first quarter of this year and its board of directors last month authorised its stock repurchase plan to be increased to $500 million.

The poor stock price to book value ratio may be one reason why most in the industry do not expect Bermuda to benefit from another wave of new insurance companies next time there is a major event that causes dislocation in the insurance market. Most expect new capital to come in different forms, such as sidecars or catastrophe bonds, which lock up capital for defined time periods.

Mr. Montross added that the reinsurance companies that remain in business will have to be disciplined and not offer massive rebates if they want to succeed in pushing through higher prices.

The reinsurers' insurance company clients are also consolidating, the executives said, but they were divided over how this will affect their own business. If insurance companies are merging with each other and becoming bigger and stronger, they will be able to keep more risk on their own books, meaning demand for coverage won't increase, Mr. Montross said, adding that he consequently expects the importance of reinsurance to decline in coming years.

Most other CEOs present at the conference reportedly disagreed, saying that other trends will dominate. They singled out increased risk awareness among clients, and higher capital requirements by insurance regulators. These trends will increase demand for reinsurance, and ensure that business volume continues to grow, Axis Re's Mr. Mayr said.