Argus Group Holdings Ltd. yesterday announced it had agreed in principle to settle a class action lawsuit pending in a New York court relating to losses stemming from the Bernard Madoff fraud.

The case had been brought against Argus and Argus International Life Bermuda Ltd., as well as ten other funds, money managers and companies, in the US District Court for the Southern District of New York by some of Argus's international life insurance customers, who had seen the value of their policies plummet.

Argus chief executive officer Gerald Simons said yesterday that the settlement, which is subject to documentation and court approval, would eliminate the expense and uncertainty of continuing litigation.

The terms of settlement include no financial settlement to be paid to policyholders. The agreement comprises "a broad package of relief, including loans to policyholders, the assignment of certain Argus International claims to a litigation trust, and cooperation by Argus International in connection with litigation of the assigned claims," the company said yesterday.

"In exchange, the Argus Group and Argus International will obtain broad releases relating to the claims in the litigation and other protections and relief."

The settlement would allow Argus "to eliminate the burden, expense and uncertainty of litigation as well as the concomitant distraction of resources and efforts from their businesses", the company said.

Mr. Simons said he was not in a position to provide an estimation of the likely cost of the settlement.

Argus and the other defendants in the suit were accused of failing to see numerous "red flags" around Madoff's company. The plaintiffs sought damages for negligent misrepresentation, unjust enrichment and breaches of fiduciary duty. Argus continued yesterday to deny all allegations of wrongdoing.

Daniel Krasner, a partner with the New York law firm who brought the case, Wolf Haldenstein Adler Freeman & Herz, said yesterday he had no comment on the agreement, as it had only reached the stage of being a "memorandum of understanding".

The Bermuda insurance, pensions and investment group also announced yesterday that it filed a claim in Bermuda Supreme Court against Tremont Group Holdings Ltd. and Tremont (Bermuda) Ltd. relating to Argus's purchase of life insurance unit Tremont International Insurance Ltd. (TIIL) in December 2006.

Among several claims, Argus is seeking damages for a breach of warranties in the purchase agrement because of Tremont's alleged overstatement of the asets of TIIL.

After the takeover, TIIL became Argus International Life Bermuda Ltd. (AILB), whose investments with two Tremont-managed Rye Select funds were seriously impacted by the collapse of Bernard L. Madoff Investment Securities LLC.

Trading was suspended in the Rye funds following Madoff's arrest last December and in January, AIBL informed some of their life insurance clients that this could have caused their policies to have a "negative cash surrender value".

Later in January, Argus took legal action in a Cayman Islands court to try to force the winding up of the two Rye Select funds in an attempt to recover policyholders' assets. Yesterday, Argus announced that it had been successful in those efforts in petitioning the Cayman Grand Court to appoint liquidators over the Rye Select Broad Market Insurance Portfolio LDC and the Rye Select Broad Market XL Portfolio Ltd.

Mr. Simons said: "Having done what we can to protect the interests of our policyholders by seeking the appointment of independent liquidator, Zolfo Cooper, over the Rye Funds, Argus is now turning its attention to its own case against Tremont, arising out of the purchase of TIIL.

"It is quite clear that TIIL was not worth what Tremont said it was and that Argus has suffered losses and damage as a result."

Some Argus clients also had a slight exposure to Madoff investments in their pension funds, and legal moves are also ongoing to try to recover anything possible.

"Argus Select Funds, which support the pension policies of the Argus Group, have a small investment in the Pioneer Momentum AllWeather fund, which in turn, had invested in the Bermuda-managed Kingate Global Fund Ltd., a BVI-incorporated Madoff feeder fund," the Argus statement reads.

"Argus is advised that Pioneer is seeking legal advice in both Bermuda and New York to determine its ability to recover losses as a result of the Madoff fraud."