Electric Mutual Liability Insurance Company (EMLICO) over their controversial move from Massachusetts to Bermuda, has settled with EMLICO's liquidators and General Electric Co. (GE), EMLICO's principal insured.

Allstate Insurance Co. was one of the firms that sued regulators for approving the redomestication. The settlement has been approved by a Bermuda court.

Meanwhile in another surprise, GE and EMLICO are now negotiating a settlement with the Massachusetts division of insurance (DOI).

And Chicago lawyers for another of those reinsurers, Kemper Re, on Friday expressed concern about this development in a letter to DOI commissioner, Linda L. Ruthardt, complaining that reinsurers were not allowed to participate. Lovell White Durrant lawyer, Joseph T. McCullough, counsel for Kemper Re, sought clarifications from Ms Ruthardt on unconfirmed reports that the DOI was doing a deal that could lead to the waiving of any criminal charges against GE, EMLICO and associated insurer, Electric Insurance Company (EIC).

The negotiations came to light when the DOI, GE, EMLICO and EIC asked a Massachusetts judge to suspend the case against Tillinghast-Towers Perrin in which the DOI sought EMLICO-related documents.

Mr. McCullough understands that the DOI is insisting on the repatriation of EMLICO back to Massachusetts from Bermuda, with GE agreeing only if certain concessions can be agreed.

The letter to the commissioner advances the Kemper Re view that EMLICO was moved to Bermuda "to enable GE to have inflated claims against EMLICO accelerated and approved by its handpicked liquidators and thereby increase the amount of money GE would be able to collect (unfairly and illegitimately) from EMLICO's reinsurers.'' It said, "By returning EMLICO to Massachusetts, the cornerstone of the fraudulent scheme would be undermined, and GE would be prevented from benefiting from the scheme.'' Those, as yet unproven allegations, are at the heart of a dispute that has piqued the interest of Massachusetts lawmakers, who have urged the DOI to publicly investigate. Attempts to reach GE for comment were yesterday without success.

Mr. McCullough urged the DOI to avoid giving GE any more rights than the company would have had if EMLICO had been put into liquidation in Massachusetts. And he said, whatever decision is taken, it should be made public.

Mr. McCullough said, "There have also been troubling reports that GE is attempting to persuade the division to allow EMLICO to remain in Bermuda in return for a payment of some sort of fine by GE and/or EMLICO.

"As I am sure you will appreciate, any such "plea bargain'' would be completely unacceptable to those who have been damaged by the fraudulent redomestication.

"If GE is unwilling too enter into a settlement that includes the repatriation of EMLICO to Massachusetts, the division should terminate the negotiations and reopen the 1995 redomestication proceedings.'' Meanwhile, The Financial Times' World Insurance Corporate Report last month accused Bermudian and Massachusetts regulators of "tunnel vision'', "erring on the side of permissiveness'' in their decisions regarding EMLICO.

They said that the allegations that EMLICO knew it was insolvent before coming here are "increasingly convincing'', and, "also strengthening'' are claims of mutual collusion between EMLICO and GE in opposition to reinsurers.

Yet, said the publication, regulators in neither Bermuda nor Massachusetts have reconsidered their approval to allow the company to change domiciles.

They lectured, "When the issue is heard yet again, Bermuda should be mindful of its reputation.'' The article also states, "As EMLICO's legal stalling tactics mount, the company continues to be liquidated by a GE appointee, instead of by the impartial Massachusetts Commissioner's office, in a jurisdiction where pay as payable, and not pay as paid, applies to reinsurance treaties.'' It continues, "As Bermuda's policy of liquidation in favour of creditors spins out of control to the benefit of General Electric, the international insurance community -- which has made Bermuda's fledgling industry possible -- becomes increasingly disenchanted.'' The article concludes, "If Bermuda, which accepted EMLICO under its tighter 1995 legislation, wishes to avoid embarrassment, its Ministry of Finance should immediately investigate the relocation proceedings to determine if it was defrauded.

"Likewise, the Massachusetts regulator should act quickly, as she is already the last person in the US -- save EMLICO, GE and their lawyers -- to admit that it is possible the wool was pulled over her eyes.''