To the editor: I am writing on behalf of the Bermuda insurance industry with regard to your March 24 editorial "At What Cost Convenience?" on the subject of Electric Mutual Liability Insurance Co.

The aim of this letter is to correct misconceptions and challenge assumptions that seem to have arisen as a result of a decision by the Bermuda insurance domicile not to become publicly embroiled in this dispute, a decision heavily influenced by the dictates of sub judice.

Before doing so, I should point out that this is not the first time, nor is it likely to be the last, that as a matter of prudent regulation the island has chosen to remain neutral and stay out of what is essentially a disagreement between contracting parties, each of whom has a range of legal and other remedies open to them.

So what is to be made of Bermuda's public silence on the EMLICO matter? Your answer to that question, as indicated in the editorial, seems based on the assumption that instead of initiating an investigation, Bermuda's authorities did nothing and "remained inert when evidence suggested their U.S. counterparts were duped."

Our response is that EMLICO's continuance application to move to Bermuda was first subjected to a thorough review by Bermuda's Insurers Admissions Committee. Though this committee's deliberations and findings are, and must remain, confidential, it is clear from an affidavit sworn by Bermuda's registrar of companies that EMLICO's license was issued on condition that it be subject to several key restrictions. More recently, and as a result of allegations emerging from the EMLICO dispute, it became clear from court proceedings that the registrar had conducted an extensive internal review before concluding that an independent investigation would not be appropriate. It would not have been appropriate, in view of the legal actions that had been commenced at that time, for the registrar to have discussed this review in public.

Furthermore, Bermuda's regulators have maintained close contact with Massachusetts regulators and have monitored relevant information as it was made available. Based on that information, the Bermuda regulators have not been persuaded that the U.S. regulators were duped. As was indicated in the registrar's affidavit, the Bermuda regulators were aware from the outset that the nature and number of adverse developments in the area of environmental claims was such that "EMLICO could be rendered insolvent."

Against this background, it is quite unreasonable to suggest that an investigation outside the court system should have been commenced. According to a Bermuda Supreme Court judgment on an application for a judicial review, the EMLICO matter does not constitute a case of "clear and manifest fraud." It goes without saying that had this not been the situation, the registrar's position would have been drastically different.

It is perhaps also worth remembering that the Supreme Court decision allowing an application to set aside leave to begin judicial review proceedings has been appealed and could go before Bermuda's Court of Appeal this summer. If the review is allowed to proceed, matters up for examination will include the Bermuda government's decision to consent to the EMLICO continuation, the registrar's decision to register the EMLICO consent, and the minister of finance's decision to register EMLICO as an insurer.

The bottom line, as indicated by an earlier judgment on the hearing of a petition for the winding up of EMLICO, is that remedies such as arbitration are available under the terms of valid reinsurance contracts concluded with EMLICO.

Lastly, I take issue with your contention that "Bermuda's hands-off attitude" should be a concern to all companies doing business in the domicile.

Bermuda has worked long and hard to strike the right balance between onerous regulation and weak, meaningless controls. One of the reasons the Bermuda market succeeds is because of the spirit of a very real working partnership between the regulated and the regulators, which produces an efficient regulatory environment that does not stifle private-sector innovation.

Roger R. Scotton

Director of Information

Bermuda insurance industry

Hamilton, Bermuda