Negotiations have reached an advanced stage for an out-of-court settlement between Bermuda-registered EMLICO (Electric Mutual Liability Insurance Co.) and major US reinsurer, General Re.

A spokesman for the Bermuda-based joint liquidators said from New York on Friday that they have entered into a commutation with the General Re group of companies (General Reinsurance Corp., North Star Reinsurance Corp. and General Star National Insurance Co.), which resolves all differences between them.

The joint liquidators are David Lines and Peter Mitchell of Coopers & Lybrand Bermuda and Christopher Hughes of Coopers & Lybrand London.

General Re's companies will withdraw from ongoing litigation in Massachusetts and elsewhere, the statement said, and by agreement, the terms of the commutation will be confidential.

There was evidence months ago ( The Royal Gazette , May 9) that the two sides were edging closer to an agreement.

EMLICO and its founder, sole policyholder and sole creditor, General Electric Co. (GE), have been at the centre of a fire storm of charges and litigation surrounding EMLICO's move from Beverly, Massachusetts to Bermuda in the summer of 1995, a move that was followed four months later with a declaration of insolvency.

A Bermuda-based GE spokesman said on Friday: "GE has maintained all along that this is a commercial dispute and that in the fullness of time, as the various parties negotiate, it will be settled.'' Reinsurers claim the move to "creditor friendly'' Bermuda was orchestrated by GE and EMLICO after the company knew it would face insolvency, to allow for the control of the EMLICO liquidation in Bermuda by GE.

Reinsurers claim that GE and EMLICO conspired to deceive regulators in Bermuda and the US about their state of solvency, before the move. They claim reinsurers were being set up to pay more expenses over a shorter period of time.

The claims are denied by EMLICO and GE, who say reinsurers are trying to escape their obligations under reinsurance contracts.

Allstate Insurance previously negotiated out of the festering dispute, which has led to court proceedings in the US, the UK and Bermuda.

A Supreme Judicial Court in Massachusetts is right now considering several aspects of the case.

Massachusetts regulators, who have conceded that EMLICO and GE may not have been completely candid when they applied for permission to leave Massachusetts, are asking the court to approve a controversial settlement agreement that would provide for the Massachusetts Commissioner of Insurance to become a US receiver over EMLICO.

But the court has already expressed concern, and have agreed to further review, whether or not the state Division of Insurance had legal standing to approve the transfer of the company to Bermuda, in the first place.

The commissioner, EMLICO's liquidators and GE have already agreed to the proposed new scheme. Liquidators have also obtained approval from the Bermuda Supreme Court.

The objecting reinsurers were not a party to the secret negotiations and have complained bitterly that the deal involves their money.

Reinsurers are seeking the return of EMLICO to Massachusetts, although Bermudian insurance regulators are of the view that it would take an act of Parliament to accomplish that.

A Bermuda Supreme Court case, in which reinsurers are seeking judicial review, and an overturning of the local regulators' decision to allow EMLICO into Bermuda, may be headed for the Privy Council in London.

Mr. David Lines