The Bermuda Stock Exchange (BSX) in June launches the first ever Bermuda insurance market index to track the performance of Bermuda based insurers and reinsurers. William Woods describes how it will work.

The Bermuda Insurance Index is a joint initiative of the BSX and London's FTSE International and is designed to facilitate performance comparisons between insurance companies operating in Bermuda with those based in the United States and Europe. The index seeks to demonstrate the "Bermuda effect" - a widely held theory that insurance companies operating in the tax efficient environment of Bermuda perform better than those based in the US, UK and Europe. Initial research appears to prove that theory: a back history calculated from early 1990 shows the Bermuda Insurance Index has consistently outperformed the NASDAQ Insurance Index (comprised of approximately 100 companies), the S&P 500 and the FTSE 100.

The index will be launched in the first half of June and will appear in the Financial Times daily as well as on Bloomberg, Reuters and the BSX website at www.bsx.com.

At launch, the index will comprise the 11 publicly traded, international insurance companies which have mind and management in Bermuda:

Annuity & Life Re Limited.

ACE Limited.

Exel Limited.

IPC Re Holdings Ltd.

LaSalle Re Holdings Limited.

Mid Ocean Re Limited.

Mutual Risk Management Limited.

Partner Re Limited.

Renaissance Re Holdings Ltd.

Stirling Cooke Brown Holdings Limited.

Terra Nova (Bermuda) Holdings Limited.

The index is market capitalisation weighted and is compiled using prices taken from the primary markets, while all mergers and acquisitions are factored into the index as they occur. An independent committee of market practitioners, chaired by the ceo of MRM, Robert Mulderig, will supervise the design and management of the index.

Eligibility in the index is contingent on three factors:

* global headquarters and senior staff must be based in Bermuda;

* market capitalisation must be greater than 1% of the total capitalisation of the index; and

* stocks must be in US dollars and listed on the main board of NYSE, NASDAQ, Amex or BSX.

It is intended that the index will eventually be tradable in the form of an index options contract. This will enable investors to invest in the Bermuda offshore insurance market in a single transaction. As chief executive officer of the BSX, I believe that with the rapid growth and maturity of the Bermuda market, the index will provide a timely and focused benchmark of the Bermuda insurance industry. This will encourage analysts to look more heavily on the Bermuda market, possibly creating a greater demand for Bermuda stock.

The index is our latest initiative in a highly focused strategy designed to complement Bermuda's existing insurance industry, which today boasts assets in excess of $100 billion. Over the past three years, the BSX has positioned itself as a niche exchange focused on adding value to Bermuda's thriving international business industry, in particular the insurance and reinsurance markets.

In operation as a domestic exchange for 27 year, the BSX has since the implementation of an internationalisation plan in 1995 developed rapidly as the world's first fully electronic, offshore securities market. More than 200 equities, funds, debt issues and depository receipts are currently listed on the BSX with a total market capitalisation (excluding investment funds) in excess of $47 billion. In 1996, the BSX was granted designated offshore securities market (DOSM) status from the US Securities and Exchange Commission and is currently seeking other international recognitions.

In addition to the FTSE/BSX Bermuda Insurance Index, the exchange's insurance strategy includes:

* the listing of special purpose vehicles (SPVs) such as act-of-God or CAT bonds;

* the development of CATEX International in conjunction with the US based Catastrophe Risk Exchange Inc. CATEX will be Bermuda's first fully electronic trading and communications system through which members can cede, exchange or purchase risk; and

* listing insurance companies: ACE Limited, Exel Limited and Mutual Risk Management are already cross-listed on the BSX.

The BSX has a clear mission to participate in the development of the offshore insurance market. As the only stock exchange in Bermuda, we are perfectly placed to assist in the design and launch of innovative insurance products, like the Bermuda Insurance Index. This only enhances the reputation of Bermuda as a leading international business centre.

William Woods is ceo of the Bermuda Stock Exchange, Hamilton. Tel: (1) 441 292 7212; fax: (1) 441 292 7619; e-mail: ceo@bsx.com