London Reinsurers have picked up the ball in the battle to have Electric Mutual Liability Insurance Co. (EMLICO) repatriated to Massachusetts.

It comes after one of EMLICO's most vocal critics, its reinsurer Kemper Re, ended their fight suddenly by agreeing to settle.

The big surprise came this past week during the long Bermuda holiday, when the Kemper Re settlement was put in perspective.

Kemper Re, it was announced, is being bought out by a unit of EMLICO founder, General Electric Co. (GE). It may have been a classic case of "if you can't beat 'em, buy 'em''.

The buy-out effectively took Kemper Re, the most active legal opponent to EMLICO and GE, off the ball.

There was no indication what effect the purchase would have on Bermuda subsidiary, Kemper Reinsurance (Bermuda) Ltd.

But now, in a Bermuda Supreme Court application for judicial review, London reinsurers are trying to accomplish what Kemper Re failed to do.

Reinsurers take centre stage in EMLICO battle The action filed by Alexander Johnston-Brown, on behalf of himself, and as a representative underwriter of syndicate 210 at Lloyd's, and the other London Reinsurers, seeks a revisiting in the Supreme Court of the regulatory decisions that allowed EMLICO to come to Bermuda in 1995 as a Class 3 insurer.

Reinsurers alleged that EMLICO and its founder, GE, conspired to move an insolvent EMLICO out of Massachusetts and away from state regulators to gain an advantage by having the insurer declare bankruptcy in a more useful jurisdiction.

Insolvency in Massachusetts means a liquidation under state control.

Insolvency in Bermuda provides for more control by creditors. GE is the only policyholder and sole creditor of EMLICO. Reinsurers claimed the move to Bermuda was designed to allow GE to have far more control over the liquidation, and was accomplished by deceiving state regulators as to the company's solvency. The allegations have been denied by both GE and EMLICO.

EMLICO filed for insolvency with the Bermuda Supreme Court four months after arriving here, citing developing adverse conditions. The liquidators appointed were David E.W. Lines and Peter C.B. Mitchell of Coopers & Lybrand Bermuda, together with their London partner, Christopher Hughes.

Massachusetts commissioner of insurance Linda Ruthardt, has been fighting with the Bermuda liquidators for control over EMLICO since a US court ruled that EMLICO was still a Massachusetts company. She is required to take control over insolvent state insurers.

A federal judge has cleared the way for her to seek receivership over EMLICO.

Interested parties have filing deadlines that begin this Friday and stretch to before the scheduled September 10 hearing. If successful with her receivership petition, Commissioner Ruthardt intends to consult with Bermuda authorities about getting EMLICO back, and has indicated that she will go to the Supreme Court, if necessary, to state her case.

Meanwhile, Kemper Re owner, Lumbermens Mutual Casualty Co. of Illinois has signed a definitive agreement to sell the reinsurer to GE unit, GE Capital, for $500 million. The deal is expected to be done by the end of the year.

Kemper Re will become part of GE Global Insurance Holding Corp., one of the world's largest reinsurers. GE Global Insurance also owns Kansas-based Employer's Re, one of the world's largest direct writers of reinsurance.

Kemper Re had 1997 revenues of $807 million. GE Capital has assets of more than $250 billion.

COURTS CTS