Superior National Insurance Group, who are suing the company for more than $200 million for alleged fraud and unfair business practices.

And President of Inter-Ocean Reinsurance Merv Holland has said that the allegations made by Superior National Insurance Group (SNTL) against his company are "absurd'' and "ridiculous''.

Last week California-based SNTL filed a civil law suit in Los Angeles County Superior Court seeking compensation and punitive damages from both Inter-Ocean and one of the company's owners American Reinsurance.

SNTL also claimed that the companies were involved in fraud, intentional interference with contractual relations, international interference with prospective economic advantages and unfair business practices.

"The allegations are absurd and ridiculous,'' said Mr. Holland. "They have invoked what we feel is an unnecessary and inappropriate law suit It is baseless in fact of law, there is no question of this.'' When SNTL acquired Business Insurance Group from Foundation Health Systems (FHS) the company required the seller to provide $175 million of adverse development protection. FHS decided to supply this in the form of a reinsurance contract.

According to SNTL, American Re offered the most attractive price and was accepted and American Re designated Inter-Ocean to issue the contract.

Robert Nagel, the General Counsel for SNTL said that approximately ten months after the coverage was agreed to and the completion of the acquisition, SNTL booked $175 million of additional losses which were ceded to American Re and Inter-Ocean. But Inter-Ocean and American Re claim that they were misled and tried to enter into discussions to rescind the agreement.

"We feel there was not full disclosure given and we have been deceived,'' said Mr. Holland.

"I think the main issue is what the company knew and when they knew it. The facts of the case are the loss was triggered by a substantial increase in BIG's reserves for workers comp losses.

"The reinsurance covers aggregate limit within three months of the inception date of the contract.'' Mr. Holland added: "The preliminary investigation revealed there was material factual information that had been withheld during the underwriting process.'' Inter-Ocean claim they tried to seek to arbitrate this dispute with BIG, which is provided as a remedy under the contract of reinsurance.

Mr. Holland added: "We asked them to come to the table, but they wouldn't so we had to exercise contractually what to do. In our opinion the ultimate superior who bought BIG seems to want to skirt the arbitration process and attack American Re and Inter-Ocean in what we believe is a meritless lawsuit.''