The former head of Bermuda Fire & Marine Insurance Co. Ltd.'s international business was questioned on Friday in Supreme Court about the methods used to estimate the sums the company needed to set aside to meet mounting losses.

Bermuda Fire's liquidators allege that Bermuda Fire's management and board underestimated the reserves and incurred but not reported losses (IBNR) the company would need to meet future claims so as to hide the company's insolvency.

Keith White, now chief administrative officer at ACE Ltd., testified under subpoena on Friday about how management and the board attempted to deal with the international losses which would eventually drive Bermuda Fire into liquidation.

Mr. White is married to Judy Panchaud White, currently the head of the general and life business at BF&M Ltd., the company created in 1991 to hold Bermuda Fire's domestic assets which the liquidators claim were fraudulently transferred.

Mr. White's memory of events up to 15 years ago was put under the legal microscope by Clare Montgomery, the lawyer for Bermuda Fire liquidator Ernst and Young. Going back through minutes of meetings, letters and reports, she questioned him about the methods the company used in reserving for expected losses.

His testimony was peppered with statements that he couldn't remember many of the details. He attempted to remember meetings and discussions about management's growing distrust of figures being provided by HS Weavers (Underwriting) Agencies Ltd., which Bermuda Fire entrusted to write most of its international business.

The result of the distrust was that Bermuda Fire became one of the first companies in the market to employ an actuary to get a estimate of the size of the problem. Mr. White said Bermuda Fire's hiring of actuarial firm Tillinghast caused further rifts with Weavers.

Back then, the market placed a heavy reliance on the underwriters to estimate the losses a company would face on a particular underwriting year, Mr. White said.

Tillinghast began giving estimates of the sizes of lossess the company would have to meet around 1984. Those estimates showed that Tillinghast believed that Bermuda Fire's international losses were only going to get worse.

Mr. White testified that he and others came to believe that Tillinghast's upper estimates were "ultraconservative''. He said Bermuda Fire consistently picked a figure below the Tillinghast estimates, adding those figures were within the Tillinghast range. The figure Bermuda Fire picked was "prudent'' and discounted at a rate the company believed its portfolio would produce on investments, he said.

Ms Montgomery asked him repeatedly about the reasoning behind what discounting percentage the company would use to figure out how much it would have to reserve for future claims.

Mr. White repeatedly said the discounting percentage didn't matter as long as the return on the portfolio of investments matched the discount rate.

"It's a red herring,'' he said.

For example, Tillinghast estimated that Bermuda Fire losses in the 1996 year would amount to $41 million. Tillinghast said the discounted figure the company would have to set aside was about $23 million. Bermuda Fire set aside $21.7 million.

Mr. White said the actual amount Bermuda Fire set aside was within seven percent of the Tillinghast acceptable range and so was considered enough.

He continues his testimony today.