Palladium Insurance, both part of Bermuda based Powerscourt Group, relating to weather derivatives contracts taken out by the companies, according to Inside Bermuda. In both lawsuits the insurance companies are joined by Bank of America.

Platinum and Palladium entered into weather derivative contracts through New York based broker Customised Worldwide Weather Insurance Agency and Bank of America provided letters of credit in connection with the transactions. The broker placed the reinsurance with GenStar, Diamond State and Terra Nova.

The reinsurers are refusing to pay out claims on the grounds that the broker allegedly exceeded the terms of its authority in placing the business, and some premium payments were not passed on to them.

But Platinum, Palladium and Bank of America believe the reinsurers have a legal obligation to pay the claims. They say the reinsurers should have known of the alleged dubious past of the broker's principal, Harold Mollin.

The lawsuits filed in New York claim: "Worldwide Weather and its principal representative, Harold Mollin, have a past history of engaging in unauthorised insurance practices, entering into contracts of insurance and/or reinsurance exceeding guidelines for agent authority and collecting premiums with respect thereto.'' The plaintiffs accuse Diamond State and Terra Nova of "negligent and reckless utilisation of an insurance agent with a history of violating authority guidelines and injuring members of the public.'' Platinum has stated in a court filing that it faces "dire circumstances and imminent ruin of its business'' if the reinsurance claims are not paid.