Yesterday in Supreme Court, BF&M chief executive officer Glenn Titterton disputed suggestions by Clare Montgomery, QC, that in 1991 Bermuda Fire's single run-off company was insufficient in the face of growing debts and reinsurance problems.

Ms Montgomery represents liquidators Ernst & Young, who are suing for damages over Bermuda Fire's 1993 collapse. This week she cross-examined Mr. Titterton on his perceptions of the risks faced by the company in its ill-fated 1991 decision to reorganise.

In December, 1990, the parent company's life insurance business was transferred to BF&M Life Insurance Company Limited. Afternoon sessions began with a March, 1991 letter sent to Mr. Titterton by the life company's actuary, Ian Michie of Actrex, Canada. "You understood he was referring to a risk of BFMIC not surviving?'' Ms Montgomery asked. Mr. Titterton agreed.

Ms Montgomery questioned Mr. Titterton on a memorandum he received on March 11, 1991, from Judy Panchaud, the executive head of BF&M Life. At the time, Ms Panchaud was reluctant to hand over its surplus reserves to bolster BFMIC.

"I suggest that she was rightly concerned,'' Ms Montgomery said, "that there was no end in sight to the cash flow crisis.'' Mr. Titterton disagreed, saying he had believed Atropos Ltd would effectively manage the insurance run-off.

Ian Michie met with Mr. Titterton late in March of 1991. Mr. Titterton said he remembered Mr. Michie "arguing very strongly that we needed to reserve surplus in the life company''. Ms Montgomery suggested "it was plain from what you described to him that the company was virtually bankrupt.'' Mr.

Titterton denied this. She continued: "And you told him in fierce terms not to mention bankruptcy in your presence again?'' Mr. Titterton said this was absolutely incorrect.

Mr. Michie did subsequently release the reserves, he admitted, but not necessarily because the survival of the parent company was in question. "I wouldn't think you could influence an actuary,'' Mr. Titterton said.

However, from a draft letter to BF&M life chairman Charles Collis, the court heard that Mr. Michie evidently had received such an impression. Mr. Titterton repeated that he had not spoken to the actuary in those terms.

Moving on to a discussion of the Bermuda Fire's bad debt reserves, and its IBNR (incurred but not received) debts, the court heard that actuaries Coopers & Lybrand of Toronto recommended that 6.7 million be added to the company's bad debt reserves. Ms Montgomery said: "Mr. Titterton, you appreciated that you had in rough terms just short of 100 million that you had to get in from your reinsurers, with respect to your IBNR claims?'' Mr. Titterton said that he assumed so now. "And you had about 100 million due to outstanding claims,'' Ms Montgomery continued. "For the first 100 million, you made no provision at all, did you?'' "Had I been asked then, I would have said yes, we did provide,'' Mr.

Titterton answered. "I simply didn't recognise it as a separate subject.'' He could not specifically recall Bermuda Fire accountant Irmgard Viera telling him that, so far as the company's account with H S Weavers was concerned, Cooper & Lybrand's recommendations were too high.

H S Weavers ceased underwriting in 1990, and a new run-off company (Southwark Run-Off Services, or SROS) was set up to manage the run-off of the Weavers business. Ms Montgomery said, "Did you realise that no quantification of the amounts owed to you by reinsurers was ever received from SROS by September, 1991?'' Mr. Titterton replied: "I don't believe I was aware of that.'' He could recall no specific discussion of bad debt reserves during the board meeting of September 6, 1991, in which the company's reorganisation was discussed.

The case will continue on Monday.

Glenn Titterton