Liability Insurance Company relocation and liquidation.

A prominently displayed letter to top trade magazine Business Insurance criticises the Bermuda insurance industry's defence of Bermuda's actions over the controversial insurer.

In a March 24 editorial, BI criticised Bermuda's regulators for being silent over the EMLICO case, which involves allegations of fraud. EMLICO's reinsurers have claimed from the start that regulators here and in Massachusetts were deliberately deceived by EMLICO and its founder and chief policyholder, General Electric (GE).

Apart from a comment to The Royal Gazette by the Finance Minister Grant Gibbons, and affidavits filed for court purposes by other local regulators, Bermuda officials have had little to say on the matter.

The BI article said Bermuda's "hands off'' attitude should be of concern to all companies doing business here.

It led to an April 14 rebuttal from local industry spokesman Roger Scotton aiming to "correct misconceptions and challenge assumptions that seem to have arisen as a result of a decision by the Bermuda insurance domicile not to become publicly embroiled in this dispute, a decision heavily influenced by the dictates of sub judice''.

In a recent letter to BI, however, Richard J. Marcus, EMLICO reinsurer Kemper Re's chief underwriting and claims counsel, calls Mr.Scotton's letter unfair.

He said he agreed with BI's criticisms of Bermuda and Massachusetts regulators "for their inappropriate actions and inaction in the face of evidence surfacing -- despite General Electric Co.'s and the EMLICO liquidators' vigorous efforts to suppress it -- that indicates GE and EMLICO engaged in an elaborate scheme to export EMLICO from Massachusetts to Bermuda, in violation of both Massachusetts and Bermuda law''.

Mr. Scotton said yesterday: "Our response to the EMLICO matter speaks for itself. We are not going to turn this into a publicity battle. We stand by our response.'' Reinsurers have claimed that apart from breaching their reinsurance contracts, EMLICO also violated Bermuda law, which Mr. Marcus said, "prohibits the incorporation in Bermuda of an insolvent insurer such as EMLICO.'' He added: "When Bermuda law is violated, and its regulatory process abused, the public interest of Bermuda is implicated, a fact that a Bermuda court judge recently pointed out.'' He agreed with BI that Bermuda officials were doing nothing in the face of compelling evidence suggesting that GE and EMLICO engaged in serious misconduct against both Bermuda and Massachusetts. The allegations have been denied by EMLICO and GE.

The Kemper lawyer said: "GE and its hand-picked EMLICO liquidators (Coopers & Lybrand Bermuda) have repeatedly relied on Bermuda's inaction as `evidence' that no fraud occurred; hence, Bermuda's `neutrality' in effect is aiding the wrongdoers.'' Bermuda's position has been that reinsurers have other legal remedies to resolve the dispute.

Yet reinsurers have said that arbitration can do nothing to achieve their stated aim: to repatriate EMLICO back to Massachusetts; nor can it do anything to punish those who violated Massachusetts and Bermuda laws and restore the confidence in the regulatory process of the two jurisdictions, said Mr.

Marcus.

And key witnesses in this case, the regulators, have said they will resist giving testimony.

Mr. Marcus continued: "Mr. Scotton also makes the amazing claim that Bermuda's regulators have maintained close contact with Massachusetts' regulators and have not been persuaded that the US regulators were duped.

"This claim flies in the face of the Massachusetts Insurance Division's statements that they received virtually no cooperation from the Bermuda regulators and that there is strong evidence that deliberate misrepresentations were made to the Massachusetts division by EMLICO during the redomestication application.'' The cooperation issue, observers have argued, has confused two entirely different time periods and the argument may be out of context.

Mr. Marcus noted that two Bermuda judges have suggested there may be a case to be heard on the fraud allegations.

BUSINESS BUC