The head of a reinsurance firm has clashed with an insurancebroker and other executives over the issue of whether brokerinvestments in insurance carriers and carrier stakes in brokers areproper.

Dr. Nikolaus von Bomhard, chief executive officer of Munich Re,kicked off the controversy when he counseled against suchinvestments at a CEO Leadership Panel at the World Insurance Forumin Southhampton, Bermuda, drawing dissenting views from otherexecutives.

Dr. von Bomhard raised the issue during a discussion of the rolethat intermediaries have in the world since New York AttorneyGeneral Eliot Spitzer's revelations of bid-rigging practicesinvolving brokers and insurers.

Michael Butt, chairman of Axis Capital Holdings Limited,moderated the panel, asking industry leaders whether relationshipsbetween brokers and carriers had changed, post-Spitzer, withbrokers now more clearly focused on client responsibilities andprofessional advisory services to clients.

Several panelists, including Brian Storms, chairman and CEO ofMarsh, weighed in on the question, reporting that there has been an"evolution" of brokers providing risk management advisory services,and that carrier and broker relationships were strong, allowing thetwo parties to meet with customers together.

After those responses, Dr. von Bomhard noted that reinsurerslike Munich Re have a complex relationship with intermediaries,because they are at once markets, clients and competitors with theintermediaries for providing professional services to clients.

"The other point I want to make is much more controversial," hesaid, noting that he has never understood the thinking behindallowing brokers to set up carriers.

"That I think is a breach of a line that should not bebreached," he said, adding that reinsurers should also not buybrokers.

"We were asked several times when brokerages were taken off thestock exchange--taken private--[if we would] take a share, and theanswer was pretty straightforward: No. We cannot cross that line,"he said.

"I think it's a reputational problem much more for the broker"relative to the client than it is for the reinsurance company. "Howcan you play the objective card if you have a 20 percent share inthe carrier?"

Mr. Butt was quick to respond, seemingly taking personal offensesince Axis was started up in Bermuda in 2001 with investments fromTrident, a private equity fund managed by MMC Capital.

"There is a difference between being a sponsor and promoter, andbeing a long-term holder. I'm the result of two of them--XL andAxis, he said, referring to a prior role as a director for XLCapital.

"If you view the broker's role as helping to create a market[when] there is a total vacuum, then it's helpful for them" to stepin to provide capacity initially, "but then step back."

"That's exactly what the companies I have been involved withhave done. They've been creators, and then stepped back."

Mr. Storms said the ownership of underwriting units by brokersis acceptable even in certain situations where capacity is not anissue.

"We have a small managing general agency that serves a verydefined niche," he said, noting that highly segmented business,which he did not identify, operates in an area that "is notefficiently served by any of the major markets."

"It doesn't in any way conflict with the large mass of clientswe have around the world," Mr. Storms said.

Prior to the panel discussion, Bermuda Gov. John Verekerdelivered remarks opening the conference that called on Bermudamarket participants to "set and aggressively police" ethicalstandards and work to preserve sterling reputations.

"There is absolutely no sign that the internationalscrutiny...of offshore financial centers is going to abate," hesaid.

"Everyone who conducts business on this island has or shouldhave a personal stake in the maintenance of its reputation," hesaid. "All the regulation in the world will not create a perfectlyclean environment. But individual businesses can," he added.