The attention of US regulators on Bermuda after probes into AIG's dealings with offshore reinsurers is something to watch closely, says one of the Island's leading businessman.

Chairman of the Association of Bermuda International Companies (ABIC) David Ezekiel yesterday said this kind of attention was "always a worry".

"Historically if there has ever been a problem in the US with a company, and there are many problems, it is seen as a company problem but if there is ever a problem with a company in Bermuda it is somehow seen as a jurisdictional problem. That is something that we have always had to cope with."

AIG yesterday admitted it had previously overstated the independence of some Bermuda-based companies it does business with, after the US Securities and Exchange Commission started investigating whether AIG used certain reinsurance contracts to favourably manipulate earnings.

AIG said it had "recently" found evidence that it had control, although not majority ownership, of Richmond ? a company housed in AIG's Richmond Road headquarters.

AIG's Bermuda operations stepped up security measures last weekend in a bid to protect documents that might be needed in the investigation.

CEO of the Bermuda operations, George Cubbon, yesterday said "no comment" when asked if the security measures had followed concerns that documents might have gone missing or been destroyed. No documents can now be removed or destroyed without Mr. Cubbon's consent.

The heightened security steps ? which include tighter access restrictions to AIG's Bermuda office ? were revealed in a company memo leaked to The Royal Gazette on Monday, and were taken hours before a decision in New York to fire the company's Bermuda-based legal counsel, Michael Murphy.

Although AIG is not the only Bermuda-based re/insurer to feel heat from regulators, it is the only one to have fired a locally-based executive with Mr. Murphy being let go for not cooperating with regulatory and government enquiries.

Mr. Murphy ? an expert on US tax matters, and close confidante of ousted AIG CEO Maurice (Hank) Greenberg ? through his 32- year career with AIG, was a strong ally for Bermuda in Washington.

Other Bermuda insurers to be subpoenaed by US authorities since an industry wide probe launched last year include ACE Limited ? with a US unit of the global insurer being named in New York Attorney General Eliot Spitzer's October suit against broking giant Marsh ? AXIS Capital, RenaissanceRe, Arch Capital, the Alea Group, XL Capital and Imagine Group.

ACE has fired two US staff in connection with Mr. Spitzer's investigation, and delayed their release of the results of an internal investigation which was first promised at the end of February. In total ACE has admitted to receiving 43 subpoenas.

Although the Island has come under fire as a result of investigations of some of its insurers, earlier this week, Finance Minister Paula Cox vowed to continue Government's public-private partnerships for diplomatic purposes, while saying Mr. Murphy's "wise counsel" would be missed. The Island has long counted on private partnerships with the Island's burgeoning insurance sector ? now more than 50 years in the making ? in its regulatory and diplomatic efforts.

Yesterday Mr. Ezekiel said while Mr. Murphy's knowledge and influence in Washington was hard to lose, Bermuda should make sure it keeps doors open for when diplomatic connections are needed.

"Mr. Murphy has definitely been at the forefront of Bermuda's representation in the US. He has intimate knowledge of the workings of Government, substantial contacts in Washington, and was largely instrumental in negotiation of the US/Bermuda tax treaty. He has always been a very important part of that process.

"One hopes that contacts have been made and lines of communication opened that can be picked up on, but that is not to say it is going to be that easy to pick up straightaway. He clearly has been one of the driving forces of Bermuda's representation and I would imagine that Government, in combination with the private sector, will now have to sit back and see what the best way to proceed is."

It was revealed on Tuesday that the Government is keeping a close eye on what happens in the US Congress, as a result of the AIG probe. Mr. Ezekiel said for now, there were no "hot potatoes" but Bermuda should be ready for when there is.

"None of this is ever good, and one has to hope behind all the smoke, the people that really know the business and the ones that matter, will make the separation. Having said all of that, every time something like this crops up ? whether Bermuda, Barbados or Cayman ? there is usually some association; some taint and we just have to again hope that it is reasonably well contained," he said.