Voicing his concern about how rating agencies assess start-up companies, the head of such a new venture suggested that rating agency processes need to be clearer.

“Rating agencies need to be more transparent and possibly come under some form of additional regulation to make sure they're transparent,” said Donald Kramer, chairman and chief executive officer of Bermuda-based Ariel Reinsurance, speaking at an industry meeting here.

Mr. Kramer made his comment responding to an audience question after delivering a keynote speech at the joint luncheon of the Association of Professional Insurance Women and the Insurance Brokers Association of the State of New York.

The question, regarding how he thinks rating agency processes should change, followed Mr. Kramer's earlier remarks that took issue with rating agencies and their treatment of start-ups like Ariel Re.

“To everyone in the business, I'm a senior citizen. To the rating agencies, I'm a 69-year-old freshman,” he said.

Asserting that new companies have to adhere to “A-plus” standards to garner “A-minus” ratings, while existing companies meet lower requirements, he asked: “What if a senior modeler from RenaissanceRe joined me and was replaced by a two-year associate? Who's the newcomer?”

Going over the history of Bermuda companies and noting that RenRe has become “the standard by which catastrophe reinsurance companies are measured,” he said that 19 days after RenRe started writing business in 1994, the Northridge earthquake hit, pounding the company with $90 million in losses on $150 million of capital.

In today's environment, “the rating agencies would have shut it down,” he said, noting that the company went on to raise $200 million in capital that year, experiencing no other major losses.

Mr. Kramer complained that rating agencies have introduced subjective criteria, and the analysts employing these criteria are young and inexperienced due to high turnover at the rating firms.

Noting that one such inexperienced analyst recently said during a presentation at an insurance conference that the Bermuda “Class of 2005″ has inferior management, Mr. Kramer asked: “What basis does she have to say that, given who the executives are in those companies?”

“When you introduce subjective criteria, you have to have experienced people applying them,” he added.

Meanwhile, Mr. Kramer said that “intelligent regulation”–not freedom from paying U.S. taxes–is what has attracted a wealth of capital to the island, responding to recent criticism of the island's tax advantages for insurers.

“When you look at regulation in the United States and some other places, you realize how dysfunctional [and] how hostile regulation is outside Bermuda,” said Mr. Kramer.

He asserted that of the new capital raised in the global insurance and reinsurance market in 2005, $10.1 billion went to Bermuda, with only $900 million going to the rest of the world. He added that $8 billion went to the formation of new companies, all in Bermuda.

Giving examples of the type of “dysfunctional” regulation that exists in the United States, Mr. Kramer noted that he recently spoke at an educational session for the Professional Liability Underwriting Society. In order for the attendees to get continuing education credits in the state of New York, Mr. Kramer reported that he was required to certify under oath that he did not have any unpaid child support payments.

Providing another example, he noted that when outgoing New York Insurance Superintendent Howard Mills was in Bermuda earlier this year defending state regulation, Mr. Mills acknowledged that New York–because it hasn't adopted some National Association of Insurance Commissioners model regulations–is not an accredited state for NAIC examination purposes.

“If [New York] can't get it together, he is the poster child for federal regulation–for getting uniform single regulation,” Mr. Kramer said.

If he had started Ariel Re in New York or California, he added, “it would have taken me years to be licensed.”

Mr. Kramer noted that he raised $1 billion in 12 weeks to get up and running in Bermuda late last year.

Bermuda has become the place “where you get ease of entry, cooperation between regulatory authorities and intelligent regulation,” he said.

The Bermuda Monetary Authority, said Mr. Kramer, has both audit and actuarial certification requirements and it maintains relationships with the NAIC and the Financial Services Authority in the United Kingdom, as well as other regulators throughout the world.

“They talk to the industry. They want to find out how we do things,” he added.

Mr. Kramer also noted that the members of the Bermuda insurance community “have a vested stake in the solidity” of the Bermuda insurance market.

“We can't afford to have criminals or crooks or miscreants come into our market and mess it up, when we have tens of billions of dollars of capital committed” to the industry, he said, noting that the market's solvency and reputation are at stake.

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