A Bermuda insurer in run-off is under a legal challenge by a local reinsurer.

GTE Reinsurance Co. has applied to the Bermuda Supreme Court to have Belvedere Insurance wound up.

The Registrar of Companies Kymn Astwood, as the official receiver, has been appointed interim provisional liquidator by the Court.

The two parties are scheduled to begin arbitration next month over a $9-million disputed bill that Belvedere is claiming for purported underwriting management and run-off services performed for GTE Re stretching back to 1981.

GTE Reinsurance is expected to respond the bill for services rendered had long been paid in full.

A Miami-based publication, Inside Bermuda, has speculated that GTE Re's application may have been a strategic move by a debtor to influence the arbitration hearing.

But GTE Re representative, lawyer Ian Kawaley, argues that there is no substance to the report's characterisation of GTE Re as a debtor, nor to its claim that the winding-up petition was filed on the grounds that Belvedere had missed a filing deadline with the Registrar of Companies.

Mr. Kawaley, who is with law firm Milligan-Whyte & Smith, said "One of the principal purposes of presenting the petition, based on the applications before the court, was that there was a need to appoint a provisional interim liquidator to preserve the assets of the company.

"And to GTE, that view was validated by the fact that Belvedere Insurance itself consented to the appointment of a provisional liquidator. GTE never sought to have the winding-up order made before the arbitration.

"Quite to the contrary, they took the view that pending the outcome of the arbitration, it was necessary for a provisional liquidator to be in place. And if the arbitration is resolved in GTE's favour, it may then be necessary to seek a final winding up order.'' Mr. Kawaley said, "There is a Belvedere Insurance subsidiary, "Belvedere Underwriting Agents Ltd., which claims to be a creditor of GTE Re. But there is no claim asserted by Belvedere Insurance, the respondent to the petition.

"And the claim by the subsidiary is a disputed claim, and subject to arbitration.'' Mr. Kawaley stated that the grounds for GTE Re's application was based on findings made by Puisne Judge, Richard Ground, in a previous civil action that Belvedere owed GTE Re money.

He said, "The petition was presented on the basis that GTE Re was a creditor of Belvedere Insurance.

"The fact that Belvedere missed their 1998 filing deadline was an incidental point that was pleaded in the petition. But the petition was based on the allegation that Belvedere was insolvent on an inter alia balance sheet basis.'' Mr. Kawaley also disputed the article's claim that the section of the Companies Act, 1981 under which the petition was filed is "normally only used by the Registrar...'' He said, "That's completely wrong. The petition was presented under section 161 of the Companies Act, the section under which all creditors petition.

"Incidentally, it is stated that GTE Re objected to Malcolm Butterfield of KPMG Peat Marwick as provisional liquidator. As far as GTE is concerned, there is no valid objection to Malcolm Butterfield, but GTE was quite happy to agree to the appointment of the official receiver.'' COURTS CTS