Online monthly newsletter Inside Bermuda has reported that a US-based insurer OneBeacon America Insurance Company, on the wrong end of a recent $37 million arbitration award, is claiming that General Electric?s Bermuda-based captive, EMLICO Ltd., is being rewarded for committing fraud.

OneBeacon, which was formerly known as Commercial Union Insurance Company, of Massachusetts, is seeking to overturn a June 19, 2003 arbitration ruling with a petition filed in September.

Inside Bermuda reported that Commercial Union is seeking for the court to vacate the ruling at the US District Court for the Southern District of New York, which has yet to issue a judgment.

The respondents in the action are EMLICO and its Bermuda-based liquidators David W. Lines, Peter C. B. Mitchell, and Christopher J. Hughes.

Commercial Union claims the award was erroneous since an earlier arbitration panel had determined that EMLICO fraudulently re-domiciled from Massachusetts to Bermuda in 1995 in order to liquidate.

If EMLICO had been liquidated in Massachusetts, Commercial Union claims its reinsurance exposure for GE?s asbestos claims would be $191,000, not the $37 million determined at arbitration.

The petition resurrects one of the most controversial incidents in the history of the Bermuda insurance market when, in June, 1995, EMLICO re-domiciled from Massachusetts to Bermuda after informing both jurisdictions? regulators that it was solvent and, four months later, filed for liquidation in Bermuda on the grounds that it was insolvent by approximately $500 million as a result of GE?s asbestos and environmental claims.

EMLICO?s reinsurers alleged that the firm fraudulently switched domiciles to take advantage of what they perceived as Bermuda?s debtor-friendly liquidation laws.

The reinsurer also stated that the Phase II award was ?fundamentally inconsistent with and contrary to ?a determination by the Phase I panel that because this Arbitration Panel is the final adjudicator? Commercial Union is no worse off in Bermuda than in Massachusetts?. In support of this, Commercial Union pointed to evidence presented on its behalf at the Phase II hearing by Judge Wilkins, a former Chief Judge of the Supreme Judicial Court in Massachusetts, who testified that ?if EMLICO Ltd. remained domesticated and was liquidated in Massachusetts?, the Supreme Judicial Court would have ?capped GE?s recovery under all primary policies at $25 million in the aggregate and thereby limited Commercial Union?s reinsurance exposure with respect to Phase II liabilities to approximately $191,000?.

Commercial Union also claims that ?redomestication to Bermuda allowed EMLICO to inflate and accelerate GE?s claims against EMLICO?s reinsurers, including Commercial Union?.

?In addition, in a Massachusetts liquidation, EMLICO?s liquidator would have been the Commissioner of the Massachusetts Division of Insurance, who is an independent public official.

In the liquidation of EMLICO Ltd. under Bermuda law, the liquidators are private citizens who were carefully screened and selected by GE, EMLICO Ltd.?s functional parent company.?