Over ten years after the failed Bermuda insurance company Mutual Re was put into run-off, creditors could be about to get their share of $1.3 billion in assets.

In one of the largest insolvency run-offs ever undertaken in the international insurance industry, Mutual Re was part of a group of insurance companies that failed with estimated liabilities between $5 and $9 billion.

The US Bankruptcy Court issued a petition last week to change the scheme of arrangement which would allow the creditors to get paid off before the original date set in 1993, when the company went into liquidation which would have led to final payment after 2015.

Mutual Re was part of five companies known collectively as KWELM which included English incorporated Kingscroft Insurance Co. Ltd., Walbrook Insurance Co. Ltd., El Paso Insurance Co.Ltd. and Lime Street Insurance Co. Ltd.

KWELM was a subsidiary of the failed London United Investments Plc which specialised in US casualty, professional indemnity and other liability insurance business.

Creditors of the insolvent KWELM group voted in favour of proposals for the early closure of the insurance run-off in a series of meetings on January 29 this year.

The overwhelming approval of the early closure programme paves the way for creditors to receive the bulk of the $1.3 billion held for distribution far earlier than under the original scheme.

So far funds recovered for distribution to creditors was last reported at $2.3 billion, with ten distributions paid out to creditors by May last year.

The early closure proposals, which were printed in the Bermuda press last week, if approved, would pay creditors the bulk of their money by late 2005 or early 2006, depending on the complexity of the claims received.

The original time scale for run-off was extended beyond 2015.

The proposals would also include a small ultimate distribution some years later, the size of which would depend on the final level of set-off, the amount of reinsurance collected, the realisation of remaining assets, the value of total liabilities and costs incurred in the final stages of the run-off.

Most of the business done by Mutual Re and KWELM was principally written through HS Weavers (Underwriting) Agencies Ltd.

Membership of the H.S. Weavers stamp also led to the liquidation of Bermuda Fire & Marine Insurance.

The group underwrote liability insurance and reinsurance, including general liability for manufacturers, professional indemnity and medical malpractice risks.

As a result of high concentration of liability business, mainly from North America, they were particularly exposed to asbestos-related and environmental pollution claims.

Over 90 percent of the KWELM assets and liabilities are in US dollars and most of the policy holders are based in the US.

Following the approval of the scheme by the courts, the scheme administrators expect it to become effective in early April, 2004.

The hearing will be held on March 19 at the US Bankruptcy Court for the Southern District of New York at 2.30pm

In 1993 KWELM?s liabilities were estimated at between $5 billion and $9 billion and run off of the policies written between 1972 and 1990 was estimated to take between 20 and 40 years due to the long-tail nature of the business written.

According to the KWELM website, payout rates to creditors range between 38 percent and 56 percent. Creditors of Mutual will get about 38 percent of their debt paid back.