for mergers and acquisitions. But high profile consolidations in the reinsurance industry could easily include more activity here in Bermuda.

Bermuda-based ACE Ltd.'s recent acquisition of Bermuda cat Tempest Re made sense, adding substantial premium in a business line that clashed with none of ACE's prior business.

But some saw ACE as a corporate "David'' in the contentious battle with American International Group chairman, Maurice Greenberg, for control of Tempest.

AIG was a founding shareholder in Tempest, and Mr. Greenberg made no secret of his displeasure with the price ACE had agreed to pay in the buy-out. AIG also had a founding interest in another Bermuda cat, IPC Re, which quickly took on ACE in a bidding war for Tempest.

ACE eventually prevailed in its pursuit of the reinsurer, but not before agreeing to pay dearly. The deal was eventually valued at nearly $1 billion.

Veteran market watcher, Victor Blake, chairman, president and CEO of LaSalle Re, speculated that as the dust settles on the ACE/Tempest acquisition, there is no reason to believe there couldn't be other moves for Bermuda's reinsurers.

He said: "That was a classic match, where a big company with a largely long-tail portfolio saw attraction in having a niche position in a very short-term portfolio of cat business. It was very complementary and would be very attractive to any number of companies.'' But he said: "One way of taking excess capital out of the market would be for a couple of the reinsurers to merge. There is nothing that I know of in the pipeline at the moment, but that could happen. It is always conceivable.

"And just like the ACE/Tempest deal, there is always the possibility that another company, outside of the Bermuda cat reinsurers, may view the acquisition of one of them to be part of their strategic plan.'' Mr. Blake said a US or European company which wanted a specialist involvement in cat business and other highly-specialised reinsurance products, would find it very attractive to acquire one of the Bermuda specialist companies.

He said: "They are very attractive so that must be a continuing possibility.

And two of the reinsurers in Bermuda getting together must be a distinct possibility.

"The only problem with that is that you don't get the full one-plus-one equals two, when two like companies come together. They often duplicate each other too much. But it is a possibility.'' While some Bermuda companies are sticking to cat-only business, others are diversifying across business lines at quite a rate. A third category is diversifying -- with a focus still heavily on the catastrophe product.

LaSalle Re, for example, expects to have a 70/30 catastrophe/non-catastrophe split within the next 18 months.

This led Mr. Blake to point out a third possibility: "Nothing here prevents a Bermuda cat from going out and acquiring some other type of business that gives them the benefit of being in another market.

"They may be able to set up offices outside of Bermuda in order to acquire business that might not currently be coming to Bermuda. As long as they can do that while retaining the benefits of being a Bermuda domicile, I don't think that would be out of the question.'' -- By David Fox Victor Blake CONFERENCE CON BUSINESS BUC