Financial problems facing Independent Insurance mounted in the first six months of 2001. A number of reinsurance contracts had been negotiated with GE Capital against the possibility of mounting claims, As the financial situation deteriorated, Garth Ramsay, the chairman, replaced Michael Bright, He sought more information on the reinsurance contracts and was horrified to learn that, instead of thesubstantial cover anticipated, Independent was exposed to a potential liability of many millions. The com company had underreserving for years. Risks had been insured at cut prices without board approval. There was a major deficit in the company is reserves and being unable to cap this exposure, further equity could not be raised.