Ties between Bermuda-based insurance group White Mountains and a small Bermuda reinsurer it does millions of dollars of business with were loosened last night with the sudden resignation from the White Mountains board of a director who had served on the boards of both companies.

Joseph Steinberg, president of US conglomerate Leucadia National Corp., came under fire recently for his close relationship to the White Mountains Group while serving as chairman of Olympus Re ? the two insurance companies have common directors, investors and Olympus counts White Mountains as the source of nearly all of its business.

It is not known whether scrutiny of the ties between the two companies has extended to formal regulatory action, but questions have been raised.

White Mountains? close ties to Olympus go back to the birth of the fledgling reinsurer when it led efforts to see the company established in late 2001.

Mr. Steinberg?s resignation from White Mountains was announced last night in a Press release. A private investor, Michael Frinquelli, was simultaneously named to the White Mountains board.

Olympus Re head Sheila Nicoll, reached last night by telephone, declined to comment when asked if there had been any change to Mr. Steinberg?s position as chairman of the Olympus board.

White Mountains CEO Ray Barrette referred questions on the reasons for the resignation ? and whether it was because of scrutiny of Mr. Steinberg?s dual role at White Mountains and Olympus ? to Mr. Steinberg himself.

In addition to being a board member for both companies, Mr. Steinberg also holds a significant ownership interest in each through his senior role at Leucadia. White Mountains? 2004 annual report listed Leucadia as 19 percent owner of Olympus as well as being one of the largest institutional holders of White Mountains.

Several attempts to reach Mr. Steinberg last night at the New York office of Leucadia National Corporation were unsuccessful.

However, Mr. Barrette did allow that the decision to quit the White Mountains board was made by Mr. Steinberg.

?We may or may not know all the reasons for the resignation,? he said. ?He resigned, we did not ask him to.?

Mr. Barrette said White Mountains continues to be comfortable with its various relationships with Olympus, including Olympus deriving most of its business from White Mountains through advisory agreements and multi-million dollar a year quota-share agreements with two White Mountains Re units.

Another White Mountains director, Bruce Berkowitz, founder of Fairholme Capital Management LLC, also sits on the Olympus Re board. No changes to his relationship with either company have been announced.

Mr. Barrette said that while some of the White Mountains subsidiary companies have ?small investments? in Olympus he does not consider White Mountains to have an ownership interest in Olympus.

The company has also redrawn the lines of its relationship with Prospector Partners, a company through which White Mountains previously disclosed a minority stake in Olympus. Mr. Barrette told White Mountains no longer has an ownership interest in Prospector but would continue to have a revenue interest. As part of its restructured relationship, White Mountains investment advisor John Gillespie, and several other staff, will no longer be employed by White Mountains but by Prospector.

Mr. Gillespie will remain a White Mountains director.

Under the terms of the new arrangement, Prospector will manage White Mountains? common equity portfolios ? worth some $1.2 billion ? for a fixed fee schedule. The company?s fixed income and other portfolios will continue to be managed by White Mountains Advisors.

A revenue-sharing arrangement between White Mountains and Prospector is being axed.

Prospector will continue to advise White Mountains on other financial matters, with an incentive compensation plan agreed for these services.

White Mountains shares closed down $8.50 in trading on the New York Stock Exchange last night to $656.50 per share. The announcement of changes at White Mountains came after US financial markets closed.