In an increasingly competitive world of property catastrophe reinsurance, Bermuda-based Renaissance Reinsurance Ltd. believes its $8 million investment in computer technology is helping keep the company away from disasters.

There are six vendors of off-the-shelf software modelling programs on the market the company could have bought, but when Renaissance was formed in 1993 the founders decided they wanted something better.

Renaissance, like other reinsurers, sells polices to insurance companies to cover major losses above certain limits when a catastrophe such as an earthquake or hurricane hits a region.

Renaissance begins paying out when an insurer's claims from all the homes, business and properties they insure from a particular catastrophe exceed a set limit.

So it's very important for the company's six underwriters to be able to know when a broker calls on behalf of a potential client whether the exposure on the coverage might be too risky a bet for the company to take, or whether it will be profitable. The bet can turn the other way if disaster hits. Then the reinsurer is stuck for millions of dollars of losses.

All the reinsurers have to go on in deciding whether to underwrite a policy is the past history of catastrophic events. The modelling programs developed by the vendors help the reinsurers estimate losses from a future catastrophic event, by attempting to predict how often hurricanes and earthquakes will strike different regions.

The problem is that the software developers may use different sets of data and standards when creating their modelling programs. Most reinsurers use only one or two programs when attempting to separate the good business from the bad.

Thus a insurer may go to several different reinsurers and get different answers from all of them depending on the program they're using.

"Everyone had different assumptions in their models,'' Jayant Khadilkar, head of Renaissance's six-member modelling department, said.

The company decided not to tie its bottom line to any one program. Instead it created a program, called Renaissance Exposure Management System (REMS), which packaged programs from the six vendors together.

REMS has allowed the company to have a faster turnaround, a consistent underwriting strategy, and an audit trail to revisit every decision.

"We decided to use as many models as possible because there is a lot of uncertainty in estimating the loss potential,'' Mr. Khadilkar said. "We don't want to get married to any one program.'' Mr. Khadilkar, a mathematician who worked for one of the catastrophe modelling vendors before Renaissance hired him, said the company decided to push the technology further.

Most models currently available can give odds of an event happening in a certain year of anywhere between one chance in 1,000 to one in 5,000. That is, the models can give the odds on a catastrophe occurring within a certain year of coverage. REMS can calculate probability up to one in 40,000 chances, he said.

Then REMS looks at Renaissance's current book of business and figures out whether the risk of adding a certain client would put undue burden on the company's portfolio compared to the payoff. A lot of the current programs only look at individual contracts without assessing the reinsurers' entire book of business.

REMS also captures information about virtually all industry contracts to get an overview of the reinsurance industry and how the market is pricing different coverages.

"We want to make sure when we add a contract to our portfolio what damage it may do,'' he said. "We aim for superior returns on a superior portfolio.'' One of the key features of this nifty software is the speed with which Renaissance has got it to work. The underwriter can have a broker on the telephone, input the information into his computer and get a result within one minute.

During the year the company may get offered up to 500 contracts. These must all be run through the system. The shortened time to get an answer helps Renaissance beat the competition, Mr. Khadilkar said.

"We have cut down the turnaround time by a factor of 10,'' he said. "It allows us to get back to the broker not just with the standard ideas but with some creative ideas.'' The speed allowed Renaissance to be the first off the ground last year with a quotation for the California Earthquake Authority property catastrophe excess reinsurance programme, the largest one in the market.

"REMS gives us a competitive advantage,'' Mr. Khadilkar said.

However don't think it's technology running the decision making process. The program spits out the numbers, but the underwriter must also assess the quality of the company.

When a client calls the underwriters have before them on their computer screens the output of up to six different models depending on the area of coverage for a specific peril. The models might output different probabilities. It's then up to the underwriter to work with the modelling staff to figure out why he is getting any differences.

"The underwriter has up to six different views of the world and a lot of times they don't agree with each other,'' he said. "We have learned a lot from them when they don't agree...Nobody knows what the right answer is.

You only know on a relative basis what the best contracts are. It's an approximation system.'' After all it's still a model based on past data and churned through various mathematical views of what the world could look like in the future.

"You can build a real fancy system but there is a saying `Garbage in, garbage out','' Mr. Khadilkar said. "The underwriter interacts with us. We do the scrubbing process. We make sure the information is reasonable.'' In an effort to get better historical data, Renaissance and other companies in the business are funding the Risk Prediction Initiative at the Bermuda Biological Station for Research. They are funding scientists around the world who are attempting to pin down more accurately when hurricanes and earthquakes occurred in the past.

So when you pass by Renaissance building on East Broadway, understand that behind the walls there's a few future hurricanes and earthquakes rumbling though their computer systems.

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JAYANT KHADILKAR: "Everyone had different assumptions in their models.''