Silence surrounded the fate of troubled accounting giant Arthur Andersen's Bermuda captive, Professional Services Insurance Co. Ltd. yesterday, with some media reporting it is already insolvent.

As of press time, no filings had been made in Bermuda's Supreme Court concerning the company, which has declined to pay a $217 million settlement that Arthur Andersen reached last month with Arizona authorities and investors in the Baptist Foundation of Arizona fraud case.

Media speculation that Andersen may be on the verge of filing for Chapter 11 bankruptcy has been rife in recent days with some bankruptcy specialists saying the more cash a company has when filing, the better.

Andersen was supposed to send $100 million to Professional Services Insurance Co. Ltd. so it could pay the $217 million, but on Friday Andersen notified Arizona Attorney General Janet Napolitano that the captive declined to pay the settlement due to its financial position.

A story in The Wall Street Journal on Monday, citing unnamed sources familiar with the situation, said the Bermuda captive had been placed into insolvency following the failure to pay the settlement.

This was backed up by a story in The New York Times yesterday which also said that the insurance company had been rendered "technically insolvent" by the failure of Andersen to make the $100 million payment to the insurance company.

The New York Times story went further and explored the rift between Andersen member firms worldwide, with a source attributing Andersen's failure to pay the $100 million as evidence of this rift.

The story said that Professional Services Insurance Co. Ltd. is owned by member firms of Andersen Worldwide, the Swiss co-operative that serves as the central hub for Andersen's global network of accounting firms in various countries. But Andersen's US division owns less than five percent of the insurer, meaning that the foreign companies would largely be paying for the transgressions of their US partner.

A spokesman for Andersen has said the firm intended to pay the settlement but these plans were derailed by the criminal indictment.

No one from the Bermuda Andersen office is commenting on the current status of Professional Services Insurance Company Ltd.

The $217 million settlement involved fraud at the Baptist Foundation of Arizona, which Anderson had been auditing since 1984, and which filed for Chapter 11 bankruptcy protection in 1999.

The Baptist Foundation was set up in 1948 with a stated mission to raise money for religious causes by selling notes to churches and private investors, mainly Baptists, but bad real estate deals led to big losses for the fund, with 11,000 investors losing $570 million in what Arizona officials said became nothing more than a "Ponzi scheme".

The collapse of the fund was the largest failure of a non-profit entity in US history.