BF&M came one step closer to closing the door on one of the biggest corporate collapses in the Island?s history when Bermuda Fire and Marine Insurance Company Ltd. exercised an option last month for 275,000 of its shares.

Bermuda Fire and Marine was incorporated in Bermuda through the Bermuda Fire and Marine Insurance Company Act in 1903 as a joint stock company with limited liability. In a controversial move in 1991, its local and international businesses were split creating BF&M as the profitable local insurance division and leaving Bermuda Fire with the debt ridden international segment. The latter went bust in 1993 and was said to owe an estimated $1 billion to its creditors.

The company?s liquidators sued BF&M and some of its subsidiaries, as well as Bermuda Fire?s five former directors who sat on its finance committee ? Gregory Haycock, William Cox, Michael Collier, the late Charles Collis and Donald Lines. Their accountants Cooper & Lines and their legal advisors Conyers Dill and Pearman were also named in the suit for damages over the company?s collapse along with a large number of Bermuda Fire?s shareholders.

The liquidators, Ernst & Young, claimed that the directors, accountants and legal advisors knew or suspected that Bermuda Fire was insolvent when the businesses were separated and took the cream of the business for themselves in the split.

Legal documents filed by the liquidators showed that as part of an out-of-court settlement in 1999, BF&M?s directors and shareholders paid out $50 million ? with almost half of that going to legal costs for the 100 days of trial. The liquidators also secured options for 1.1 million shares in BF&M.

Bermuda Fire?s exercise of its option for 275,000 BF&M shares last month was said to be pursuant to Section 4 of the 1999 agreement between BF&M Limited and the Bermuda Fire & Marine Insurance Company Limited. BF&M Limited has also advised that pursuant to Section 6 of the agreement, BF&M Limited has served notice on the Bermuda Fire & Marine Insurance Company Limited that these shares will be called.

John Wight, BF&M president and CEO cannot say whether this is the end or not. Bermuda Fire has until 2006 to exercise its options for the remaining shares.

?They still have the option to subscribe for further shares between now and 2006,? he said. ?If they didn?t subscribe for at least that number [275,000] by December 31, 2004, they would have forfeited any option to exercise them starting in 2005 so effectively they would have fallen off the table if they hadn?t exercised them.?

BF&M is indifferent about Bermuda Fire?s option to exercise the remaining shares.

?If Bermuda Fire and Marine exercises, they pay us $11.27 for each share so that is money that the company can put to good use. Or, if we decide we would rather call and cancel the shares we have that option as well so we really are indifferent to Bermuda Fire and Marine?s decisions going forward,? Mr. Wight said.