Even though an actuary estimated in 1989 that future pollution claims against Bermuda Fire & Marine Co. Ltd. could add up to $7 million, a former top executive said the company did not make reserves for such potential losses because it was following accepted market practice at the time, a court heard yesterday.

Keith White, who headed Bermuda Fire's international division until he left to join ACE Ltd. in 1989, said the company didn't make such reserves because management believed exclusion clauses in policies underwritten in the London market protected the company from pollution claims.

"To the best of my knowledge at that time I believe we had that contingency covered,'' he said.

Questioned about a note he wrote in which he remarked that a Tillinghast actuary stated that pollution could cost the company $7 million "plus or minus'', he said the actuary was giving the figure "off the top of her head''. He said the actuary had not received the data to make a proper estimation.

He said at that stage the company was only reserving for defence costs against possible claims. Bermuda Fire reserves for defence costs went from $850,000 in 1987 to $2.5 million in 1989.

Mr. White was in the fifth day of his testimony, fielding questions from Clare Montgomery, lawyer for Bermuda Fire liquidator Ernst & Young. The line of questioning is important as Bermuda Fire's liquidator alleges the company's management and board underestimated future potential liabilities on bad debt and pollution to hide the company's insolvency.

Mr. White said there was a great deal of uncertainty in the market over whether insurers in the London market were going to face liability from pollution claims in the US. The uncertainty stemmed from the sometimes conflicting decisions made by US courts.

"There were often erratic decisions in the US,'' he said.

He was asked why the company didn't follow H S Weavers practice of making reserves for possible pollution claims. Weavers, a London agency that operated in a similar manner to Lloyd's of London, underwrote international business on behalf of Bermuda Fire.

Mr. White said Bermuda Fire didn't follow a lot of Weavers' practices. He believed that Bermuda Fire followed a more conservative practice in making reserves and relied on Tillinghast for estimates.

"We took a different line from them in many things,'' he said.

Ms Montgomery finished questioning Mr. White yesterday. He will be cross examined by the defence teams beginning on Tuesday. Mr. White is testifying under subpoena.

BUSINESS BUC