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To the editor: Your Oct. 7 editorial, "Don't Drop EMLICO Inquiry," about EMLICO's 1995 reorganization and redomestication from Massachusetts to Bermuda, misses the mark. It misstates the history of the EMLICO redomestication, ignores its most salient facts and recommends a course of action that only lawyers could love.
The editorial calls for an "independent" investigation into whether the insurance regulatory process was "subverted" in connection with the redomestication or whether the Massachusetts insurance "regulators merely exercised poor judgment in not questioning (EMLICO's) liabilities."
In 1997, however, the Massachusetts House of Representatives Post Audit and Oversight Committee conducted an extensive independent investigation into the Insurance Commissioner's role in approving the EMLICO redomestication. On the very issue on which this editorial is focused, the committee found unequivocally that "the filings and statements provided by EMLICO clearly raised and placed before the division and, ultimately, the commissioner," the company's likely insolvency.
The committee's conclusion is fully supported by the irrefutable evidence in the record of the proceeding. The principal purpose of the EMLICO reorganization was to separate EMLICO's current and profitable policies from its long-tail General Electric Co. environmental and asbestos policies and to send the business entity that retained the latter to Bermuda to run off its assets against its claims for as long as possible. The material provided both to the Massachusetts and Bermuda regulators expressly informed them of hundreds of millions of dollars of GE environmental claims that could well put EMLICO into insolvency.
Moreover, it was precisely because the Massachusetts commissioner was so concerned about the possibility of EMLICO's insolvency in Bermuda that, before she approved of EMLICO's redomestication to Bermuda, she sought and obtained from General Electric a waiver of its right to file claims against the Massachusetts and U.S. insurer insolvency funds in the event that EMLICO became insolvent in Bermuda.
Finally, in the commissioner's 1995 ruling approving EMLICO's redomestication, she specifically considered and anticipated the
insolvency of EMLICO and concluded "that the failure of EMLICO after redomestication to Bermuda would not be adverse to the policyholders of the commonwealth."
Indeed, the commissioner has acknowledged in a letter written to the House Post Audit and Oversight Committee on Nov. 17, 1997, that the "division recognized the significant exposure presented to EMLICO by its many years of GE coverage and used the leverage of the application to redomesticate to obtain GE's waiver of any possible claim against U.S. guaranty funds."
She wrote: "We concluded that the failure of EMLICO after redomestication could not be adverse to the policyholders of the commonwealth."
The editorial pays lip service to the fact that the Massachusetts insurance commissioner's responsibility in redomestication matters is to ensure that Massachusetts policyholders are protected. But the editorial ignores the fact that the commissioner did protect the interests of Massachu- setts policyholders when she approved the redomestication, and the fact that the Massachusetts Supreme Judicial Court, in a September 1998 ruling, rejected an effort by the commissioner to set up a parallel EMLICO receivership in Massachusetts because it would be duplicative and wasteful and because "no Massachusetts party or interest will be harmed by the ongoing liquidation in Bermuda."
The course your editorial recommended would waste both Massachusetts taxpayer dollars and the assets of the EMLICO estate and would further pointlessly prolong a case that a Massachusetts federal court recently described as a "case which only lawyers could love."
Robert N. Risch
General Electric Co.