The world's two biggest reinsurance groups, Swiss Re and Germany's Munich Re, have created the first online reinsurance market in a bid to cut costs in an industry hit by excess capacity and depressed premiums.

The new market, known as Inreon, is being launched together with Internet Capital Group, a US-based Internet holding company, and Andersen Consulting.

The London-based venture will provide insurance companies, brokers and professional reinsurers with transaction capabilities for standardised reinsurance covers. Both Munich and Swiss Re hope the venture will lead to substantial savings.

Inreon is an acronym for "insurance meets reinsurance online", and aims to offer participants a reliable, transparent, fast and cost effective way to transfer risk, the company said in a statement.

Bermuda's Partner Re group is the first registered user of the exchange, but several other reinsurers are expected to register in the near future.

Rob Breadahl, a former investment banker and Inreon's interim chief executive, told Britain's Financial Times newspaper that the new venture should be capable of reducing transaction costs by at least 25 per cent.

Inreon will initially focus on the property reinsurance market in the US and Europe, providing cover against physical damage and any related loss of business. Inreon said this is an easy area of the market to standardise.

Bredahl indicated that the venture might be floated on the stock market within the next five years.

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