Hsbc Investment Bank is hoping to exploit the capacity crisis in the reinsurance and retrocession markets by launching the first UK-backed reinsurance company in 50 years.
Sources at the bank, who wish to remain anonymous, said the project was "in its very early stages", but it was likely the venture would be established next year to compete with the big reinsurance companies in the US and Bermuda.
"We have decided to look at this area, especially after the launch of Axis Specialty," the source said.
Axis is Marsh & McLennan's new $1bn (£680m) reinsurance venture, launched two weeks ago.
HSBC said its company could have offices in both the US and Bermuda and may begin trading by securing a domicile in a regulatory centre such as Dublin.
The retrocession market is virtually at a standstill after rates rose up to 1,000% in some lines of business in reaction to the September 11 attacks.
There is some hesitation among major players to take risks at this time. At least six other companies, including banks and intermediaries, are believed to be planning similar operations in the coming months.
Industry sources are keen to see alternatives to the Bermudan reinsurance vehicles appear because many feel they are profit-led and close for business when the going gets tough.