business as usual while the company was hammered by claims hitting the international division. Ahmed ElAmin reports By the end of 1990 Bermuda Fire & Marine Insurance Co. was facing a cash flow crisis and the directors were in a race against time to save the local domestic business from collapsing under the weight of the millions of dollars in claims hitting the international division, a court heard yesterday.

Gabriel Moss, lawyer for Bermuda Fire liquidator Ernst & Young, yesterday painted a picture of a company on its last legs, desperately attempting to keep an outward appearance of business as usual while directors worked to extricate it from the money-losing international arm.

Meanwhile, on one front the Bermuda Fire's managers were fending off demands for money from international policyholders, and on the other trying to collect on coverage that had stopped coming in from some reinsurers.

Bermuda Fire had about 800 reinsurers protecting the international business from losses. However as billions in pollution claims started hitting the markets in the 1980s some began to fail, leaving insurers like Bermuda Fire unable to collect.

Bermuda Fire was facing millions of dollars in claims from asbestos and pollution losses on policies for the years up to 1985, when the company decided to exit the international arena.

By 1989 the company had set aside bad debt provision of $5.32 million for claims on the international business. In 1990 the company's bad debt provision had risen to $9.57 million.

But for the first time Bermuda Fire decided to discount the figure backward so it showed up on the books as only $5.35 million. The discounting was an attempt to make observers believe the company's problems weren't getting worse, Mr. Moss claimed.

Weavers, the London-based insurance agency managing business on Bermuda Fire's behalf, had stopped handling Bermuda Fire's business as it was itself in trouble and about to become bankrupt. Bermuda Fire was having to meet full payments from claims without the benefit of reinsurance money.

By the end of 1990 Irmgard Viera, Bermuda Fire's vice president of international operations, was writing a series of letters to Weavers attempting to get the reinsurance money owed to Bermuda Fire.

In 1991 the situation got worse, Mr. Moss said. Bermuda Fire's managers also became concerned that Bermuda London Underwriting Agency Ltd. (BLUA), a majority owned UK subsidiary, was having a difficult time meeting claims.

Bermuda Fire was underwriting international business through Weavers and BLUA.

Company chairman Charles Collis, in a letter of January 11 to Bermuda Fire deputy manager of international operations Alastair Ritchie, wrote that it was "unacceptable to have an insolvent subsidiary'', according to Mr. Moss. Mr.

Collis -- who died last year -- also wrote the company would have to have to support BLUA "considering the possiblity that they would have to liquidate BLUA sometime in 1991'', Mr. Moss claimed.

Mr. Moss alleged the statement meant that Mr. Collis wanted to keep BLUA operating so as to not to give any warning the parent company was in trouble until the domestic business could be split off from Bermuda Fire.

During the year Bermuda Fire got word from the National Association of Insurance Commissioners that under US accounting rules the company was insolvent and in danger of losing its permission to operate in the US.

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