regulations. Business journalist David Fox finds the criticism in a brief by the Center for Insurance Research to a Massachusetts court A non-profit Massachusetts corporation has claimed that insurance regulation in Bermuda is not subject to the same stringent controls and safeguards which are imposed in states of the US accredited by the National Association of Insurance Commissioners.

The Center for Insurance Research (CIR) believes the state's commissioner of insurance exceeded her authority in allowing Electric Mutual Liability Insurance Co. (EMLICO) to move to Bermuda.

CIR describes itself as dedicated to the protection of public interest in matters relating to insurance.

Their brief on Friday to the Supreme Judicial Court of Massachusetts over the EMLICO issue said that any interpretation of state laws that would allow the commissioner to approve the "redomestication of EMLICO to a foreign country with a poor regulatory environment would serve as a dangerous precedent in Massachusetts and nationally.

"Such a precedent would allow this commissioner, any of her successors and perhaps commissioners in other states with identical statutory language to permit insurance companies on the brink of insolvency to follow EMLICO's bad example, and escape their obligations under US law by relocating to a foreign country where their own interests would be unfairly enhanced at the expense of the public interest and innocent policyholders of the insurer.

"Hence, millions of Massachusetts policyholders with insurers domiciled in other states would also be at risk, should another state similarly provide no notice of a redomestication proceeding, and allow an insurer to move to a foreign country with lax regulation.'' The implicit allegation that Bermuda's insurance regulation is inadequate was backed by a footnote that read: "Indeed, the US Congress has already voiced its concerns regarding the inherent dangers for policyholders in the `cozy regulatory environment' of certain foreign regimes, where the authorities cannot be expected to protect the legitimate interests of the American public.'' The brief referred to the controversial 1994 Dingell report that was critical of Bermuda and other regulatory environments (House Subcommittee on Oversight & Investigations of the Committee On Energy & Commerce, 103rd Congress, "Wishful Thinking: A New World of Insurance Insolvency Regulation'').

CIR added, "Moreover, in the same report, the US Congress specifically characterised Bermuda's insurance industry as being `shrouded by' a `cloak of secrecy'.'' CIR claims that in considering EMLICO's initial redomestication application, commissioner Linda L. Ruthardt "failed to take account of or knowingly disregarded the interests of the policyholders of the commonwealth and the public interest. CIR is concerned that not only have the actions of the commissioner regarding this matter damaged the interests of the citizens of Massachusetts, but they were also (and continue to be) contrary to law.'' CIR argues the order approving EMLICO's redomestication violated state law and was invalid.

The relevant provisions, they said, "authorise a Massachusetts insurer to transfer its domicile to "any other state.'' The statute does not provide a definition of the term "state''.

The term must, therefore, be given its most logical meaning, taking into account the purpose of the legislature in enacting it, as well as the public interest.

CIR submits that the most reasonable interpretation of the term in this context is a state of the United States, and not any foreign country as maintained by the commissioner, General Electric (GE), Electric Insurance Co.

and the joint liquidators of EMLICO''.

KEY CLAIMS Linda Ruthardt exceeded her authority by allowing EMLICO's move She set a dangerous precedent by granting approval The decision violated state law and was invalid Bermuda has a `poor regulatory environment' Bermuda's insurance industry is `shrouded' in secrecy COURT CTS