Bermuda Fire & Marine Insurance Co. Ltd. management made "conservative'' estimates of potential liabilities in the 1991 reorganisation, in some cases even more than was recommended, a court heard yesterday.

Irmgard Viera, who became head of Bermuda Fire's international operations in 1989, said she recommended in 1991 that Bermuda Fire should reserve 100 percent of the future liabilities estimated by actuarial firm Tillinghast.

The company eventually reserved for the potential future liabilities on a discounted basis as recommended even though Tillinghast would have allowed the company up to a five percent margin below the estimate.

"I was more comfortable with 100 percent,'' Ms Viera said in Supreme Court.

She was being cross examined by Ian Croxford, lawyer for Bermuda Fire auditor Cooper & Lines. Mr. Croxford was asking her questions yesterday about Cooper & Lines' role in the company and the reorganisation, which Bermuda Fire's liquidator alleges was a fraudulent transaction designed to remove assets from the international creditors.

Cooper & Lines claims the firm acted as auditors on instructions from the company and did not give advice on the reorganisation.

Under cross examination Ms Viera acknowledged that she complained about the fees being paid to Cooper & Lines in a memo from her to Bermuda Fire's chief financial officer on September 5, 1991.

In the memo she said that she was unhappy with the fees because Bermuda Fire was providing the basic "raw material and trial balances'' used in the audit, according to Mr. Croxford.

In court Ms Viera agreed that the trial balances of accounts were produced by the company's chief financial officer John Patterson and that it was Bermuda Fire's management that decided to discount its estimated future loss claims reserves.

At a key meeting between management and Cooper & Lines auditors on June 17, 1991 details of the 1990 accounts were thrashed out. The figures would eventually be used for the 1991 reorganisation.

At the meeting the two sides agreed to reserve $9.6 million for bad debt on amounts they estimate the company would not collect from reinsurers.

Discounted the figure came to $4.95 million. Bermuda Fire actually booked $5.35 million in discounted reserves for bad debt.

Ms Viera said the additional $400,000 was unallocated and she considered such an approach "conservative''.

She said discussion about the company's possible liability for pollution arose at the meeting. Bermuda Fire took the approach that the company was not liable for pollution losses because of exclusion clauses in its policies.

One pollution claim made against the company in a US court was eventually reversed on appeal.

Ms Viera continues giving testimony today.