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PORT MORESBY, Papua New Guinea -- Pacific Reinsurance Corp. Pty. Ltd., Papua New Guinea's first locally based reinsurer, plans to attract business from Australian and southeast Asian cedents.

Over the next five years, the Port Moresby-based reinsurer plans to retain 30 million to 40 million kina ($45.8 million to $61.1 million) of its anticipated 45 million to 50 million kina ($68.8 million to $76.4 million) gross written premiums in Papua New Guinea.

Pacific Re, initially capitalized at 41.6 million kina ($63.6 million), has been writing business since June but wasn't launched officially until last month.

Ownership is shared among the PNG government's third-party motor insurer, Motor Vehicles Insurance Trust, with a 51% stake, and the country's 11 licensed commercial insurers, which hold stakes making up the remaining 49%. Two of the insurers are locally owned; the others are subsidiaries of overseas companies.

John Arkosi, MVIT's chief executive officer, said the government share eventually would be sold to Papua New Guinea citizens and Papua New Guinea-owned companies, but "not in the short term."

Although Papua New Guinea is in the grip of a severe drought, Mr. Arkosi said the nation's strong business climate provides a strong base for a reinsurer, and the political climate is more stable than many southeast Asian countries.

"The business community in PNG is quite robust and extremely confident," Mr. Arkosi said.

The insurance, mining and petroleum sectors all expect strong results for the 1996-97 financial year despite the drought, he noted.

Pacific Re plans to build a "regional presence" but will remain medium-sized compared with other reinsurers, Mr. Arkosi said. It will write a wide variety of coverages rather than specialize.

"We only ever envisage Pacific Re will be a follow reinsurer and not a lead," Mr. Arkosi said.

A significant amount of Papua New Guinea reinsurance is placed offshore, he noted.

Mr. Arkosi admits it is difficult to establish a new reinsurer in a soft market but said the market had been stronger when the company first was launched.

Many companies in Southeast Asia have strong business ties with Papua New Guinea that Pacific Re will use, he said.

Pacific Re also has formed a "strategic alliance" with Sydney-based QBE Insurance Group Ltd. to secure business from Australia.

QBE's PNG company, Queensland Insurance Pty. Ltd., is Pacific Re's second-largest shareholder, with a 23% share.

The alliance means QBE offers Pacific Re management, operational support and assistance through its wholly owned unit, Sydney Reinsurance Co. Ltd.

Sydney Re will provide technical support when required and give Pacific Re staff the opportunity to train in Australia and vice versa, he said. Pacific Re will have four employees.

QBE also will help Pacific Re place reinsurance and "participate in some programs," he said.