Bermuda-based insurer Majestic Capital Ltd and its subsidiaries expects to file for bankruptcy in Bermuda and the US after its proposed merger with private-equity Bayside Capital Partners fell through. Bayside cited a material deterioration in Majestic Capital’s capital surplus, an inability to secure regulatory approval for the merger, and a failure to satisfy the closing condition with respect to termination of Majestic Capital’s lease for office space in Poughkeepsie, New York on terms acceptable to Bayside.“The failure to complete the merger with Bayside is expected to result in a downgrade of Majestic Insurance Company’s ‘B++’ financial strength rating and a conservation proceeding by the California Department of Insurance,” Majestic’s stated yesterday. “As a result, Majestic Capital and its subsidiaries expect to seek protection under applicable United States and Bermuda bankruptcy and other similar laws for the protection of creditors.”Majestic, formerly known as CRM Holdings, is a provider of workers’ compensation insurance in the US through its third-party administration of self-insured trusts.In 2008, CRM voluntarily gave up its trust licence in the state of New York, where there were major concerns for regulators over trusts which had become insolvent and were unable to meet their obligations to injured workers.Majestic Insurance Company, a wholly-owned US insurance subsidiary of the Bermuda firm, has made a non-binding agreement to transfer its current insurance business and loss reserves to AmTrust Financial Services, Inc.