publication's editorial that questioned Bermuda's silence over the EMLICO (Electric Mutual Liability Insurance Co.) controversy.

A letter to Business Insurance (BI), which was available for publication today, said it sought "to correct misconceptions and challenge assumptions that seem to have arisen as a result of a decision by the Bermuda insurance domicile not to become publicly embroiled in this dispute, a decision heavily influenced by the dictates of sub judice.'' Signed by industry spokesman, Roger Scotton, the letter states that it is not the first time, nor likely the last time, that the industry would remain neutral in a dispute between contracting parties, for whom there is a range of legal, and other, remedies available to them.

BI, in a March 24 article that was critical of Massachusetts Insurance Commissioner, Linda Ruthardt's proposed settlement agreement, also reserved space for criticism of Bermuda regulators.

The article said, "The Bermuda Government has steadfastly maintained that this was Massachusetts' problem to solve. While Bermuda authorities could have undertaken their own investigation, they did nothing; they appear instead to agree with EMLICO that this is a mere business dispute and seem content to gain the jobs the EMLICO liquidation will generate.

"Even if Bermuda regulators didn't believe they were deceived in the redomestication, though, they should not have remained inert when evidence suggested their US counterparts were duped.'' The industry letter responded: "EMLICO's continuance application to move to Bermuda was first subjected to a thorough review by Bermuda's Insurers Admissions Committee. Though this committee's deliberations and findings are, and must remain, confidential, it is clear from an affidavit sworn by Bermuda's Registrar of Companies that EMLICO's licence was issued on condition that it be subject to several key restrictions.

"More recently, and as a result of allegations emerging from the EMLICO dispute, it became clear from court proceedings that the Registrar had conducted an extensive internal review before concluding that an independent investigation would not be appropriate.

"Nor would it have been appropriate, in view of the legal actions that had been commenced at that time, for the registrar to have discussed this review in public.'' The letter stated that local regulators, who regularly attend NAIC (National Association of Insurance Commissioners) meetings, have maintained close contact with Massachusetts regulators.

It continued: "The Bermuda regulators have not been persuaded that US regulators were duped. As was indicated in the Registrar's affidavit, the Bermuda regulators were aware from the outset that the nature and the number of adverse developments in the area of environmental claims was such that EMLICO could be rendered insolvent.'' The letter therefore questions the reasoning of launching a separate, and perhaps inappropriate, investigation outside of the court system. It also points out the Supreme Court judgement on an application for judicial review, that the EMLICO matter did not constitute a case of clear and manifest fraud, and if it had, the Registrar's position would have been different.

It was also noted that certain court decisions were under appeal, which could lead to a full airing of Bermuda regulatory approvals for EMLICO. And it said the bottom line was that remedies such as arbitration, are available under the terms of valid reinsurance contracts involving EMLICO.

BI had argued that Bermuda's British-based liquidation laws could favour one party. The letter responded by referring to a decision of the Superior Court of Massachusetts which found that Bermuda's liquidation laws conformed substantially with that of Massachusetts, was fully supervised by the Bermuda Supreme Court, and provided a comprehensive and orderly procedure for liquidation, including the right of appeal.

The BI article also stated: "Bermuda's hands-off attitude in this case should be a concern to all companies -- particularly reinsurers -- that do business in the domicile.'' The insurance industry letter responded: "Bermuda has worked long and hard to strike the right balance between onerous regulation and weak, meaningless controls.

"I would submit that one of the reasons the Bermuda market succeeds is not because of the presence of rules attempting to cover all eventualities, such as those no arising, in the EMLICO matter, but because of the spirit of a very real, working partnership between the regulated and the regulators which produces an efficient regulatory environment that does not stifle private sector innovation.''