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Collis disputes `black mark' remark

was split up in 1991 do not have all the facts, company chairman the Hon.Mr. Collis, who also took issue with the provisional liquidators' report to policyholders and creditors this month,

was split up in 1991 do not have all the facts, company chairman the Hon.

Charles Collis said yesterday.

Mr. Collis, who also took issue with the provisional liquidators' report to policyholders and creditors this month, was responding to comments contained in an article in the January edition of the Bermudian Magazine.

In the article, Mr. Robert Clements, who helped found major Bermuda reinsurers ACE Ltd., EXEL Ltd. and Mid Ocean Re, said the controversial spli of Bermuda Fire & Marine's local and foreign business was "the blackest mark in Bermuda regulatory history''.

In 1991, Bermuda Fire and Marine won Supreme Court approval to sell its profitable domestic business to new company BF&M Ltd. while the original company retained its foreign operations which became mired in mounting losses related to the H.S. Weavers underwriting stamp. Bermuda Fire & Marine has since entered liquidation.

"That was the blackest mark in Bermuda regulatory history,'' said Mr.

Clements, chairman and chief executive of Marsh & McLennan Risk Capital Corp.

"In the eyes of the insurance buyers of the world, and in the eyes of people like ourselves, the ability to do that is the ability to manipulate the outcome in favour of one group of customers to the detriment of another group of customers.

"You would have to be eternally on guard -- especially if you were a non-Bermuda customer that you would be in the group manipulated against.

"It was wrong. It may be legal in Bermuda, but it was a commercially insensitive and indefensible thing to do. And its handing all your critics a powerful weapon to use.'' Minister of Finance the Hon. David Saul had little to say about the regulatory concerns regarding the 1991 transaction, except to reiterate Government's position.

"It was not against the law at the time. When the new act comes in, that will be prohibited,'' he said.

Asked about Mr. Clements' comments, Mr. Collis responded: "Well I think that he just doesn't know all the facts involved. And, he's therefore speaking with an element of a substantial lack of knowledge. He is looking at it from the point of view of comments made to him by people overseas. They are speaking with a lack of knowledge of what the true facts were.

"The company, Bermuda Fire & Marine, was left with more capital than it started with. The creditors were in fact left with more capital and more potential than they had initially.

"One would prefer that he didn't say those things, and one can't stop him from saying them, and he's saying it in the light of the business and people he's meeting. But I still think that it doesn't correctly reflect what the facts are and were.'' Mr. Collis, when asked about the just released provisional liquidators' report to policyholders and creditors which said the company has failed to set aside enough money to meet liabilities, said: "The liquidators' report again, is distorted. They are lumping in future IBNRs.'' He said that he had had no real opportunity to study the report in any detail.

But he said: "One of the things they said was that Bermuda Fire hadn't allowed enough for run-off expenses. They are making allowances for instance, for pollution liability. Virtually no insurance company has made full provisions for the maximum extent of, or for any pollution liability.

"They all make provision, as indeed Bermuda Fire did, for the legal expenses related to fighting pollution claims. But there's not enough money in the world to pay the United States' pollution claims, if that became a liability.

"The liquidators have included estimates for all these things. They have over-estimated on the best and worst case scenarios. And then in addition, they themselves have done things that have cost Bermuda Fire creditors millions.

"You only have to look at that report and see that the expenses so far are something like $5-6 million. If a company was solvent before that, after you've spent $6 million, it's unlikely to be.

"They talk from a different perch and a different perspective. They spend creditors' money and then say it was the directors' fault.'' Mr. Collis said that at the time of the 1991 transaction, the company was "in a reasonable, good financial position''.

He continued: "The best advisors in the world for insurance liabilities tell you at the time that your liabilities are this much. That's eight years after the run-off of the foreign business started in 1983. When the split took place it was eight years into the run-off.

"Tillinghast said that the total liabilities were `X'. What these liquidators are now saying is that in the worst case scenario, if you take pollution and everything else in the United States, it could be four times that amount.

"Well, you know, that's just not on. Tillinghast haven't said that, or anything.

"If you look at the way they (the liquidators) estimate, and deal with their own fees. Everything is grossed up as though money were no object. The whole business of liquidation is a question of liquidators being concerned to make sure they take no risks. That is, you assess everything excessively. You make maximum provision and charge maximum fees.'' Bermuda Fire & Marine provisional liquidator Mr. Anthony Joaquin, yesterday declined to comment on Mr. Collis' remarks.

The Hon. Charles Collis.