STAMFORD, Conn.-The Trenwick Group's agreement to acquire Chartwell Re Corp. in a $368 million deal is seen as a good move for the two reinsurers, but is not expected to have a significant impact on either the reinsurance market as a whole or underlying insurance prices.

The deal between the two midsize reinsurers, which will create a company with estimated 1999 gross premiums of $891 million, however, marks one more step in the reinsurance industry's ongoing consolidation.

Under terms of the deal between the two Stamford, Conn.-based companies, Chartwell shareholders will receive 0.825 Trenwick shares for each Chartwell share in a tax-free transaction. This amounts to a value of $23.82 per Chartwell share, based on Trenwick's closing price of $28.88 on Monday. The deal is subject to shareholder and regulatory approval.

The $368 million value placed on the deal also reflects the assumption of $104 million of Chartwell debt and the planned purchase by Chartwell of $100 million in stop-loss insurance to protect reserves.

The acquisition will move Trenwick up in the ranks of U.S. reinsurers. The companies' combined $633 million in policyholder surplus as of March 31 would have placed it among the top 10 U.S. reinsurance companies, according to first-quarter 1999 data compiled by the Washington-based Reinsurance Assn. of America.

The deal also will expand Trenwick's operations into Lloyd's of London, as well as the U.S. domestic market, officials of the companies said at a telephone news conference last week discussing the deal.

"It propels the Trenwick growth strategy several steps forward," said James F. Billett Jr., Trenwick's chairman, president and chief executive officer. He will continue in that position in the combined company. Trenwick in 1998 also acquired Sorema U.K., which has since been renamed Trenwick International.

The deal also will relieve Chartwell from seeking other ways to expand in the consolidating reinsurance industry, said Richard E. Cole, chairman and CEO of Chartwell. He will become Trenwick's vice chairman. "It had become very difficult for us to find suitable acquisition candidates," he said.

The purchase will give Trenwick significant operations in Lloyd's via Chartwell Managing Agents Ltd., formerly known as A.J. Archer P.L.C.

Prior to this deal, Trenwick has avoided the Lloyd's market, said Mr. Billett.

While the Lloyd's operations have suffered poor results from warranty insurance business and U.K. auto insurance business, he said, "We are confident that management has addressed or is addressing the problems that they have had with Archer."

Both companies' top executives have talked informally for the past two years about a deal between the two, but serious negotiations began three months ago, Mr. Billett said.

A slump in Chartwell's stock price over the past year makes the deal more attractive for Trenwick now, he said. Chartwell, which closed at $15.125 June 21, the day before the deal was announced, had a 52-week high of $30.9375. The deal values Chartwell at 0.9 times book value. Chartwell stock closed Friday at 19.38 per share, while Trenwick's shares closed at 25.00.

The deal includes the purchase of $100 million in stop-loss cover for a $50 million premium from London Life & Casualty Reinsurance Corp., a Barbados unit of Great-West Life Assurance Co.

The steep premium is the going rate for stop-loss coverage that includes Lloyd's syndicates, Mr. Billett said. He said, though, that actuarial reports suggest the coverage will not be needed, referring to it as "belt and suspenders" coverage.

The combined companies' approximately $891 million in 1999 gross written premiums reflects $406 million in domestic reinsurance business; $160 million in domestic primary business; $151 million from the Lloyd's operations; $115 million in international reinsurance business; and $59 million in international primary business.

Analysts say it appears to be a good deal for the two reinsurers.

"If they can integrate this well, it actually will provide some decent scale to the Trenwick Group," said Don Watson, director at rating agency Standard & Poor's Corp. in New York. "It significantly improves

their position in the U.S. marketplace and. . .will make them a significant player on the global scene," Mr. Watson said.

"They've historically had slightly different orientations in terms of their books of business, and I think it's a complementary combination," said Mark Charron, partner in charge of Deloitte & Touche's risk management consulting practice. He is based in Hartford, Conn.

While Trenwick has focused on U.S. reinsurance business, Chartwell also has written direct domestic insurance in addition to its London market business, Mr. Charron noted.

But the deal is unlikely to have any significant impact on either the reinsurance market or insurance buyers. "I don't see this consolidation doing much in terms of impacting the risk manager," said Mr. Charron.

"I think this one is probably too small to have any big impact on buyers of reinsurance," said Ken Zuckerberg, an analyst with Keefe, Bruyette & Woods in New York.

"The combination of these two makes them decent-sized," said Gary Ransom, senior vp at Hartford, Conn.-based Conning & Co. But, "there's still lots of reinsurers, and there's still lots of competition for business, so I don't think it incrementally changes the environment."

Michael Smith, an analyst with Bear Stearns in New York, said this is more an example of "an issue of survival for the smaller, less well-capitalized reinsurance companies" than it is a case of "adding anything to the reinsurance market."

The deal is seen more as one more step in the reinsurance business' ongoing consolidation.

"There continues to be a drive for scale on the part of the reinsurance industry, and that drive for scale is now demonstrated by acquisitions in the middle tier of reinsurers," said Mr. Watson.

Gavin Souter contributed to this report.