Massachusetts Insurers Insolvency Fund over the failure of Bermuda-based Electric Mutual Liability Insurance Company (EMLICO), the Boston Globe reported.

The finalising of such an agreement removes the Fund's alarm over the insolvency of EMLICO, which moved to Bermuda just months before they sought a winding up petition in the Bermuda Supreme Court.

EMLICO had been set up by GE to write its liability cover, but EMLICO split off its "good business'' to associated firm Electric Insurance Company and redomesticated to Bermuda in the summer of 1995 with GE facing substantial environmental liabilities.

The Insurers Insolvency Fund, designed to pay claims when an insurer files for insolvency, consists of all Massachusetts property and casualty insurance companies. It had previously been so concerned about the prospect of becoming involved in EMLICO's failure that it had joined with EMLICO reinsurers in seeking to have its move to Bermuda reversed by Massachusetts regulators.

The EMLICO situation could prove pivotal in a tight US Senate race in Massachusetts between incumbent Senator John F. Kerry and Republican challenger, Governor William F. Weld.

Governor Weld is being criticised for his Massachusetts Insurance Division's handling of the EMLICO redomestication.