LETTERS TO THE EDITOR

QUESTIONS RAISED

ON TRANSIT AID CUTSYour June 16 editorial, The Flight for Drug Funds, implicitly criticized the congressional appropriations committees for not transferring $60 million

from other transportation uses to drug enforcement. You say the Coast Guard has been waiting for months but should not have to wait until next year to get the money it needs.

There are at least three reasons to question giving the Coast Guard what it wants:

* There are those who doubt that every recently closed Coast Guard station needs to be reopened.

* In May, a patrol boat with 109 crewmembers left the Yucatan waters to escort the seized yacht Ark Royal to Miami, prompting one federal law enforcement official to observe: Talk about a waste of taxpayers money. All that crew and all that fuel was wasted - and all for one marijuana cigarette . . . I couldn't believe it.

* Many experts think too high a share of U.S. drug-related spending goes to interdiction, too little to the demand problem. Said Dr. Lloyd D. Johnston of the University of Michigan: We've basically lost on the supply battle field and in my opinion will continue to lose even if we pour a quarter of the treasury into it.

To transfer money to the Coast Guard, the administration sought to make further cuts in Amtrak and mass transit, valuable programs that already have suffered big cuts in recent years. Your advice to Congress would be more helpful if you acknowledged which programs you would cut and why.

Ross Capon, Executive Director, National Association of Railroad Passengers, Washington

JAPANESE HINDERED

IN EFFORTS TO IMPROVE

Mr. Simons' uncritical description of the Japanese workers' housing situation (Japan's Living Conditions Mock Nation's Wealth, Opinion, May 17, 1988) is accurate. The hardworking Japanese citizen who aspires to better housing is a four-part victim: the government property tax law, the gigantic real estate speculator, the land holding farmer and, most important, his own political passivity.

Peter Whiteford, Houston

REINSURERS SHOULD

SETTLE OWN DISPUTES

Disputed reinsurance contracts need not be a fertile field for lawyers at all. While The Journal of Commerce article (Reinsurance Disputes Over Collections Spurs New Field For Lawyers, June 14) spotlighted the American Bar Association conference in New York City on reinsurer collections and insolvency, it did not point out that all such disputes are destined to be solved by practitioners of jurisprudence.

Increasingly, more and more ceding companies and their reinsurers are realizing that job No. 1 is to conserve cash and other assets of a troubled company. Therefore, it is far wiser to promote a commercial solution involving compromise rather than conflict among the parties.

Finally, it seems that the peacemakers in the industry will have their day, since there is an increasing awareness that the attendant legal bills that go along with the disputes can cost almost as much, or sometimes more, than an early compromise and settlement.

This same kind of thinking can be applied to companies in runoff or rehabilitation. Further, it should be potentially possible to apply it to companies in liquidation. The theory here is that rather than wait 10 to 15 years to undertake massive setoffs of liabilities (since many ceding companies may also be retrocessionaires), one can abbreviate the process by doing an estimation of ultimate future liabilities.

Subsequently, the impaired company can cash out, settling up with all ceding companies by paying the net present value of ultimate outstanding liabilities. The cedant ends up with less than 100 cents on the dollar, but does get cash now rather than a promise of cash tomorrow.

Given the increasing internationalization of the insurance industry, one

gains another perspective with such an approach. Rather than interrupt the cash flow from reinsurance recoverables, such commercial solutions allow the flow to continue. This will, in turn, avoid further insolvencies that have been evident from the ripple effect once a domestic or alien link in the chain weakens or breaks.

One would hope that conference attendees came away with understandings that offer insight into alternative approaches for dealing with industry difficulties. Such alternative attempts avoid disputes and the attendant representation that becomes necessary when business partners stop dialoguing directly. Certainly, this attendee came away with perspectives that offer more than the old adage, with a new twist for lawyers, . . .you can pay me now or you can pay me later, but no matter, you'll pay and pay dearly.

Anthony F. Motola, Manager, Special Projects

Occidental Fire & Casualty Co. of North Carolina, Raleigh, N.C.

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