history have been told that estimated liabilities could now reach a staggering $1.4 billion.

In the most notorious of Bermuda's insurance failures, Bermuda Fire & Marine Insurance Co. Ltd. (BFMIC) is estimated to be insolvent by more than a billion dollars. And six months after a scheme of arrangement was put in place, creditors have now been allocated more than $20 million in the first payment.

BFMIC's joint liquidators John McKenna and Anthony Joaquin of Ernst & Young Bermuda, and, Gareth Hughes of Ernst & Young London said yesterday they have set a payment schedule of 1.5 percent for the first payments to creditors.

At June 30, BFMIC was said to have held liquid assets of $50.8 million, and the liquidators estimated that reinsurance proceeds of more than $200 million will be realised over the course of a scheme of arrangement which became effective at the beginning of the year.

But the joint liquidators are now estimating BFMIC liabilities, including a margin for adverse development, at $1.4 billion.

The run-off scheme of arrangement was approved by creditors last November and sanctioned by the courts in Bermuda, England and the US last January.

Liabilities could top $1 billion The shortfall of more than a billion dollars is substantially higher than prior estimates. Liquidators last year moved up their estimated shortfall up to $450 million.

They said six months ago that the nature of the business accepted by BFMIC through H.S. Weavers (Underwriting) Agencies Ltd. (now in liquidation) and C.R. Driver & Co. Ltd. (now in liquidation) and through Bermuda London Underwriting Agency Ltd. is unlikely to be run off in less than 20 years.

The controversy or notoriety over the BFMIC case was heightened by a plan recommended to shareholders by the insurer's directors in 1991, to move the assets and liabilities relating to domestic operations to various subsidiaries, with the shares of the subsidiaries distributed to BFMIC's shareholders.

The controversial split up of the company (termed by liquidators "the 1991 transaction'') came as the company was running off the international business, with critics claiming that, in fact, assets were stripped from a company heading for insolvency.

By October 1993, draft unaudited statements for the year to December 1992 showed the company did not meet solvency margin requirements. Liquidators have sought to test the 1991 transaction's legality in the courts.