The cross-examination of Irmgard Viera by liquidator Ernst & Young's lawyer, Clare Montgomery, continued yesterday.

Mrs. Viera who was head of Bermuda Fire & Marine's international operations during the 1991 reorganisation, faced questioning about what she knew of the company's reserves for losses which had been incurred but not yet reported (IBNRs).

It was suggested to Mrs. Viera that she must have known that the reserves set aside for IBNR didn't include bad debt the company wasn't going to collect from reinsurers.

Mrs. Viera disagreed saying that she thought that the reserves for future losses did include bad debt. In previous testimony Mrs. Viera had admitted she now knows she was mistaken.

Ms Montgomery has in previous questioning suggested that Mrs. Viera could not have avoided knowing that the reserves for potential losses didn't include bad debt.

After being taken through supporting documentation, Mrs. Viera agreed that the figures did not account for bad debt on IBNR but said that at the time she believed they were an accurate assessment of the company's exposure. She said she relied on the auditors and the company's finance department who prepared the financial statements.

Mrs. Viera acknowledged that anyone reading the accounts would conclude that the figures represented the totality of Bermuda Fire's exposure.

Ms Montgomery also questioned Mrs. Viera about an unallocated reserve for bad debt and whether this was intended to cover IBNR.

Mrs. Viera said that the reserve was not. She added that it was not Bermuda Fire's policy to reserve for bad debt on IBNR because they could not be quantified.

Ms Montgomery suggested that it would have been prudent to provide some general allocation for bad debt on IBNR.

Ms Montgomery persisted and ultimately Mrs. Viera agreed that it was not acceptable to have a zero bad debt reserve for IBNR and that she realised that there would be losses associated with IBNR claims which would not be recoverable from reinsurers.

Ms Montgomery sought on several occasions to suggest that Mrs. Viera was independently aware of the alleged deficiencies in the figures and the imprudence of not reserving for bad debt on IBNR.

She also highlighted what she claimed were inconsistencies in Mrs. Viera's testimony.

On several occasions, Mrs. Viera said that she could not recall certain details and did not know why certain things had or had not been done. She pointed out that she was being asked to recall matters that had happened many years ago and that her memory was not reliable.

Ms Montgomery insisted that she must have known about these things at the time because she was in charge of the department which oversaw the international operations.

Mrs. Viera said that she had inherited these responsibilities from Keith White and that some transactions had been performed by him. In certain instances she was not aware of how various figures were arrived at or what they represented, she said.

At the end of the day, Ms Montgomery asked Mrs. Viera whether she was making an effort to tell the truth about her recollection of events.

Mrs. Viera responded that she was doing her best to truthfully answer the questions.

BUSINESS BUC