Two of the world's largest insurers, American International Group (AIG) and Chubb, have filed an application to the Bermuda Registrar of Companies to set up a new reinsurance company.

The proposed venture will be run in association with Goldman Sachs and is anticipated to have a capacity of at least $500m (£342m) and approximately 200 staff.

The move comes as banks, brokers and insurers rush to take advantage of rate hikes in the hardening market caused by the World Trade Centre tragedy.

Market sources predict there will be up to ten new reinsurers, such as Marsh & McLennan's AXIS Specialty, by the end of the year.

International Underwriting Association (IUA) chief executive Marie-Louise Rossi said: "I expect a number of institutions and banks would have drawn broad plans for a new market entrance for when the time is right."

She said since 11 September, a growing number of venture capitalists and investment banks had contacted the IUA to find out more about trading in the London Market.

A report by ratings agency Standard & Poor's (S&P) passed to Insurance Times predicted the insurance industry would see a rush of new capital.

It said: "To date, more than $5bn (£3.4m) has been earmarked for Bermuda-based insurance entities, notably XL Capital, Ace and PartnerRe, along with three start-up insurance operations.

"In total, S&P director Donald Watson expects up to $10bn (£6.9m) of new capital to flow into the insurance industry in the next six months.

"This repeats the pattern of Hurricane Andrew in 1992 and the Northridge Earthquake in 1994. Together, they led to the successful creation of eight property/casualty start-ups, which raised about $5bn."

Last week, White Mountains Insurance Group formed a new Bermuda-based property and casualty reinsurer.

The company will have $1bn (£680m) funding and Anthony Taylor, former deputy chairman of Wellington Holdings, will become chief executive officer and chief underwriting officer.

Banc of America Securities LLC and Benfield Advisory, part of the Benfield Group, will act as financial advisers to Taylor's start-up.