operations during the 1991 reorganisation yesterday admitted in Supreme Court she made a mistake in ignoring reports about the rising tide of pollution claims hitting the London market.

Irmgard Viera, who is now head of BF&M Management Ltd., yesterday faced tough questioning over the way she managed Bermuda Fire's international business from Clare Montgomery, the lawyer for Bermuda Fire's liquidator Ernst & Young.

She was being questioned about the reasons Bermuda Fire didn't reserve for future potential pollution claims and bad debt.

Bermuda Fire's liquidator claims the 1991 reorganisation was a fraudulent transaction in which profitable domestic assets were stripped from the company to form BF&M.

In 1989 Ms Viera fell into the thick of the problems over rising claims being encountered in Bermuda Fire's international runoff operations when she took over from Keith White.

A report from actuarial firm Tillinghast showed that Bermuda London Underwriting Agencies' liabilities had increased by $7 million to $46 million on a discounted basis for the 1989 year.

In the next year those liabilities had increased $10 million.

Bermuda London was a joint venture between London underwriting agency H S Weavers and Bermuda Fire.

Bermuda Fire also underwrote international business though Weavers.

In the report Tillinghast warned Bermuda Fire that the claims situation seemed to be worsening and that the estimates might turn out to be too low.

Ms Viera said she understood Tillinghast had excluded pollution estimates "as requested'' by Bermuda Fire, and had excluded estimated defence costs on fighting pollution claims in court.

Ms Viera agreed that the warning indicated that the situation needed monitoring over the next two years to see whether more reserves might be needed.

She admitted Bermuda Fire's decision not to put aside reserves for bad debt on potential future claims was not justified given the evidence. She also said that she had not advised the board to put aside reserves 7.5 percent below the Tillinghast estimate.

"I still believe that it was the end of the increase,'' she said.

Asked where she had the expertise to come to that conclusion she said she assumed the claims were settling down.

"In hindsight it was wrong but between 1990 to 1991 I firmly believed that,'' she said.

She said she didn't ask anyone at Cooper & Lines or elsewhere for advice on the subject.

"I don't know why I didn't do certain things,'' she said. "It was ten years ago. I don't remember.

Ms Montgomery asked whether the collapse of Kingscroft, Walbrook, El Paso, Lime Street and Mutual Re (KWELM) in early 1990 had sent "alarm bells ringing'' at Bermuda Fire about the company's exposure to pollution.

Ms Viera said company executives "certainly took notice'' of the collapse.

The KWELM group of companies were the principal members of Weavers and shared the same parent as Weavers -- London United Investments.

London United was suspended from doing business in the market due to what was described as an "unprecedented surge'' in claims from asbestos and pollution claims.

Ms Viera said she checked the situation with Weavers and was told pollution exclusion clauses covered Bermuda Fire from liability. She said she didn't recall articles in the major papers stating that London United had reserved for pollution claims.

"If you had checked they would have told you they were reserving for pollution,'' Ms Montgomery said.

Ms Viera repeated that she had checked with Weavers.

"It was a highly significant question if the press reports were right,'' Ms Montgomery said.

"Yes, it might have been,'' Ms Viera replied.

She said that she didn't check with Tillinghast on pollution liability as the firm's policy was not to discuss the business of their clients.

In the spotlight: Witness Irmgard Viera (left) and lawyer Clare Montgomery BUSINESS BUC