"In the same breath that they are announcing staggering multi-billion dollar reserve increases, insurers are saying, 'don't worry, reinsurers are going to pay for nearly all of it.' We are not convinced that the reinsurers of this business written many years ago--if they even exist today--will be so agreeable."

Mr. Dreyer said although most ceding companies have acknowledged and accounted for some reinsurers being unable to pay, they have not accounted fully for the likelihood that these claims might be disputed by the reinsurers.

Mr. Dreyer's comments came a few days after Warren Buffett came out with a statement that an unnamed reinsurer had stopped paying claims. While some analysts speculated that the company in question was Gerling Global Re, the company's U.S. subsidiary that is in run-off, Christoph Groffy, representative for Gerling Group, vehemently denied the company is failing to pay claims.

At the symposium, Mr. Dreyer said that in addition to reinsurance collectibility issues, a backlash from abuses of surety contracts, terrorism, deteriorating asset quality, and a struggling economy are contributing to S&P's negative outlook for the industry.

Although S&P maintains a negative outlook on the sector, Mr. Dreyer said the outlook would be reviewed again at mid-year.

"If we can expect strong prices continuing well into 2004 and moderation in the negative factors, we might be inclined to revise the outlook to stable," Mr. Dreyer added. He noted that for each of the past two years, S&P's p-c rating downgrades have outnumbered upgrades by a margin of 20 to one.

This year is shaping up to be less severe, but S&P's negative outlook signals that downgrades will continue to outnumber upgrades, he said.

"There are so many loopholes in the Terrorism Risk Insurance Act that terrorism risk remains a major wild card for the industry. The federal backstop has provided psychological support but not strong financial support for insurance underwriters, which have no foundation for accurately pricing the risk," observed Mr. Dreyer.

He said also that, "it seems that those that need it aren't buying it or aren't buying enough because of what they perceive as high prices in a tough economy."

Responding to questions about what early warning signs brokers should monitor to anticipate an insurer's possible financial problems, Mr. Dreyer cautioned that there is no magic predictor of insurer troubles.

"We would certainly recommend looking at our financial strength ratings on insurers," Mr. Dreyer advised, "but brokers might also be attentive to market information.

"Brokers are in a great position to observe insurers with pricing behavior that is clearly out of synch with the rest of the market and could be even downright irrational.''

He suggested brokers might also look at how financial markets are treating the insurer's securities. Rapidly falling equity prices or widening yield spreads on the insurer's bonds could be telltale signs of trouble.

However, he termed these indicators "very noisy. An insurer may price a product at a very low rate for a short period of time to gain share in a particular line of business. Although we could debate the wisdom of that, it may not mean the insurer is in trouble. Likewise, the stock or bond market could overreact to some bad news about an insurer that is financially strong."

Addressing the influx of new reinsurers in Bermuda, Mr. Dreyer said, "there is a wide variety of business plans and shareholder expectations among the startups. It is misleading to think about the new companies as identical. In order for us to be comfortable in rating a startup company, we have to be confident that the management team is capable and committed to sticking to a conservative business plan.

"Having lots of capital is a good start, but no startup company is going to be assigned a rating at the very highest levels, nor would we foresee all the startups getting the same rating. They are very different companies with very different organizational structures, shareholder commitment, and competitive advantage."

To date, Standard & Poor's has assigned ratings only to Axis Specialty Insurance Co. and DaVinci Reinsurance Ltd. Both companies have been assigned 'A' financial strength ratings.

The Symposium was sponsored by The Council of Insurance Agents & Brokers in association with the Reinsurance Association of America, the American Insurance Association, and Russell Miller.

A report of Mr. Dreyer's remarks was released by his company.