Bermuda Fire & Marine Insurance Company had spent more than $2 million on legal costs, or on average nearly $40,000 a week.

And for that same 12 month period, fees and disbursements to the joint provisional liquidators were put at $1,684,000.

They reported that those sums, together with other expenses, led to a pay-out for that year to the end of October of $4,930,000.

The figures are contained in a report to policyholders and creditors of the failed Bermuda insurer, made public last week, which indicates a balance at October 31 of unpledged cash on hand of $18,378,000.

The joint provisional liquidators, Ernst & Young, UK partner Mr. Gareth Hughes and Bermuda partner Mr. Anthony Joaquin said that legal advisors were appointed in Bermuda, the UK and the US to provide advice in relation to the proceedings and the protection of assets in these three jurisdictions.

Those legal costs, however, included $300,000 paid to US insurer, Transit Casualty in receivership, "in respect of an agreement to contribute to its legal costs in relation to the statutory demand and attempted winding-up proceedings and for the benefit of legal advice obtained on the 1991 transaction (the split up of the company).

"The agreement was entered into by the joint provisional liquidators on legal advice and with the unanimous approval of the (informal creditors') committee.

Of the total amount paid, $95,000 is subject to the agreement of creditors in the proposed scheme, failing which it will be treated as an advance distribution to Transit.'' The provisional liquidators found unpledged cash inherited upon their appointment of $2,255,000. They had reinsurance recoveries of $6,633,000, received $11.5 million as a result of the commutation of the Sun Alliance and London Insurance plc policy and had other receipts of $2.9 million.

Those sums of receipts totaled $21,053,000.

They included the Sun Alliance deal where, as a result of legal advice and after consultation with the committee, the joint provisional liquidators entered into an agreement to commute the aggregate excess of loss reinsurance agreement between BFMIC and Sun Alliance in relation to the business written by BFMIC through the Weavers stamp.

The commutation resulted in the $11.5 million being paid immediately to BFMIC in full and final settlement of amounts due from Sun Alliance under the agreement.

Other receipts ($2,920,000) include dividends and interest received on investments and cash deposits in addition to sundry refunds and other amounts due to BFMIC on appointment, "which have been pursued and successfully recovered by the joint provisional liquidators''.

The provisional liquidators report their view, and that of their advisors, that a cash-based reserving scheme of arrangement, similar to that already implemented in the well publicised KWELM companies liquidation, "will prove most appropriate primarily because such a scheme would afford a number of significant advantages for the creditors of BFMIC.'' BFMIC and KWELM share many of the same creditors.

The advantages include the potential for earlier payments to creditors and the fact that there would be consistency in the run off of insolvent companies that had shared similar ties to Weavers and other related companies.

In addition, there would be a more efficient and better realisation of reinsurances, payments would be made in the currency of claim, avoiding exchange rate fluctuations, and no formal proof of claim would be required by creditors.

Further, there would be incorporated a method of resolving disputed claims under the scheme that could produce substantial savings.

The provisional liquidators are now expecting to finalise the draft scheme of arrangement within the first quarter of this year, with a view to seeking creditors' approval and court sanction.

BFMIC was last month ordered wound up by the Supreme Court, upon petition by shareholder, Mr. William Cox.