1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT


                       Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


Date of report: October 16, 1996
     (Date of earliest event reported)




                          NORTH EAST INSURANCE COMPANY
             (Exact name of registrant as specified in its charter)


            Maine                      0-11184                  01-0278387
(State or other jurisdiction of      (Commission              (I.R.S. Employer
 incorporation or organization)       File No.)              Identification No.)


                    482 Payne Road, Scarborough, Maine 04074
               (Address of principal executive offices) (Zip code)


Registrant's telephone number: (207) 883-2232


   2
Item 5. Other Events.

North East Insurance Company ("NEIC" or the "Company") has decided to
discontinue its proposed private placement of stock and to consider alternative
transactions for raising capital.

As previously reported, NEIC last June commenced a private placement of up to
1.5 million shares of its Common Stock. The offering price (as later amended)
was $1.25 per share, reflecting a discount from prevailing open-market trading
prices for NEIC stock due to applicable restrictions on transferability of the
offered shares.

As previously reported, the Company and Ballantrae Partners, LLC ("Ballantrae")
as of August 22, 1996 entered into a Standstill Agreement concerning future
ownership and control of NEIC stock. The Standstill Agreement provided, among
other things, for certain changes in the private placement -- namely, that the
Company would sell not more than 800,000 shares through the private placement to
other investors, and an additional 400,000 shares to Ballantrae at $1.25 per
share. (Ballantrae last May had entered into a Purchase Agreement to acquire
810,000 shares of NEIC stock from Bernard D. Gershuny, approximately 27% of the
NEIC shares then outstanding. Further information concerning the Purchase
Agreement and the Standstill Agreement is contained in prior Form 8-K reports of
the Company and in Ballantrae's amended Schedule 13D report.)

Following announcement of the Standstill Agreement, the Company received letters
from Texas Capital Securities objecting to continuation of the private placement
and the proposed issuance of shares to Ballantrae. Texas Capital Securities is a
registered broker-dealer that currently is the principal market maker for NEIC
stock. At around the same time, the Company also received objections from RFBK
Partners, a partnership that (according to a Schedule 13D report filed by it)
had recently bought approximately 6% of the outstanding NEIC stock through
open-market purchases at between $1.75 and $2.00 per share.

The Company's decision to discontinue the private placement was based upon a
number of factors, including changes in prevailing trading prices for NEIC stock
since the commencement date of the offering, continued increases in retained
earnings since such date due to favorable operating results, the status of
Ballantrae's pending proposal to acquire Mr. Gershuny's stock and the execution
of a Standstill Agreement with Ballantrae regarding future control of the
Company, management's assessment of the prospects for achieving future
improvements in the A.M. Best rating for the Company even without the private
placement, costs associated with a further change in the terms of the private


   3



placement, potential costs of threatened litigation over the private placement,
possible alternative capital raising transactions, and other factors.

With regard to Ballantrae's purchase of the Gershuny shares, the Maine Bureau of
Insurance on September 20, 1996 issued an Order approving that proposed
transaction. Both the Purchase Agreement and the Order are subject to further
conditions that have not yet been satisfied, including a requirement under
applicable law to obtain prior regulatory approval from the New York Insurance
Department. On or around August 23, 1996, Ballantrae filed its application with
the Department seeking such approval. To the Company's knowledge, the Department
has not yet acted on this application.

The Purchase Agreement also contains a condition that approval be obtained from
the U.S. Bankruptcy Court for the Eastern District of New York in a
bankruptcy-related action involving Mr. Gershuny's shares. To the Company's
knowledge, that condition has not yet been satisfied or waived by the parties.



   4



                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.


                                     NORTH EAST INSURANCE COMPANY


Date: October 21, 1996               By: /s/ Graham S. Payne         
                                        Graham S. Payne
                                         Treasurer and Chief
                                         Financial Officer