Mutual Risk Management (MRM) encountered trouble in February, when the company posted losses of close to $100 million for the fourth quarter after its US insurance companies - Legion and Villanova - ran into troubled financial waters because of an inability to recover reinsurance they claimed to be owed.

In March, the Bermuda Monetary Authority put the company under review, and a team was created to monitor the company's business on an ongoing basis. An officer in the BMA's Insurance division said the authority felt it "prudent" to take action after MRM's financial situation showed increasing deterioration.

In April, MRM reported that its losses had widened by more than $10 million to $110 million. And just last month, the company again restated its fourth quarter results - this time, losses for the period amounted to $122.7 million. The company almost came to a standstill after first reporting the disastrous results. The losses put the company in default of certain credit agreements, state insurance regulators took over MRM's US insurance units, numerous legal actions were launched by unhappy clients and there were multiple class action lawsuits brought on by disgruntled investors.

The company's executives and directors were also forced to resign because directors' and officers' liability insurance had become too expensive. The company's chief executive, Robert Mulderig - whose father founded the company - was among those who stepped down. He was replaced by David Ezekiel, who said that the company's future could be brighter if there was a "positive" outcome to its negotiations with state regulators in control of its US companies, Legion and Villanova.

The troubles also forced MRM to delist its shares from the New York Stock Exchange in April. Prior to the delisting, the company's share price had plunged as investors responded to dismal earnings. Mr. Mulderig's share holding, worth $12 million in 2001, dwindled to $100,000 this year as the company's share price dropped below a dollar. According to SEC records, Mr. Mulderig's 2000 income amounted to almost seven times that amount at $697,000. The company has since May been seeking to restructure its service units into a separate company - IAS Park - as these companies have continued to perform well. The company filed a proposal for restructuring its debt in the Bermuda Supreme Court almost two weeks ago.

If the proposal is approved, it would mark one of the final stages in MRM's efforts to extricate its ongoing captive management and brokerage business from its defunct programme insurance operations.

The proposal will be considered by MRM creditors on February 5 at the Supreme Court. If creditors approve the scheme, MRM will then apply to the Supreme Court for an Order approving the Scheme.

The proposal would affect $198 million in debt, comprising $110 million in bank debt and $88 million owed to MRM debenture holders.

The creditor group would own the majority of the ongoing business, while the defunct insurance units would be owned by MRM stockholders.

@EDITRULE:

In a surprise move that shocked Bermuda's insurance industry, Overseas Partners Limited (OPL) announced in February that it would bow out of the market. The privately-held company, set up in 1983 as United Parcel Service's (UPS) reinsurer, said it plans an "orderly runoff" of its reinsurance operations. Staff reported the decision as coming "out of the blue" and one industry insider was said to be "flabbergasted" by the announcement that the company is closing up shop. The company reportedly has capital in the region of $1.3 billion and a strong balance sheet, loss reserves independently reviewed and approved by two outside actuarial and consulting firms, and significant operating strength in terms of employees, and customer and broker relationships. OPL's move to exit the insurance market is understood to have resulted from a push by shareholders who may feel they could maximise the return on their investment through other vehicles. "However, our company is a private organisation with a unique history and shareowner base. "Our shareowners have become used to receiving generous dividends and having the ability to sell their shares back to the company as and when they wish," said OPL's chief financial officer, Mark Bridges. "This is a drain on capital but reflects the fact that we are not a publicly quoted company, unlike the ACEs, XLs... and so these are the only forms of liquidity available to our shareowners."

Mr. Bridges underscored that current market conditions put OPL at a disadvantage.

"Unfortunately we are in a very capital-intensive industry and recent events and market entrants have raised the bar; we are no longer able to support both the provision of regular liquidity to shareowners and satisfy the new capital levels required for long-term success," he said. Poor underwriting results may also have driven the decision.