"When the chief financial officer of one of Germany's largest insurance companies began dealing in complex derivatives with U.S. banks two years ago, his superiors thought nothing of it.</br></br>The officer had managed simple interest rate swaps to hedge the company's vast investments, even reaping a few million dollars in profit.</br></br>What's more, his company, Gothaer Life Insurance, had stood on the sidelines as Anglo-American banks pioneered the use of complex derivatives in other countries, showing that they were useful in protecting large investments.</br></br>But within a year, things had turned ugly at Gothaer. The derivatives -- contracts pinned to the performances of other investments, such as stocks, bonds, currencies and commodities -- overwhelmed the 61-year-old CFO, and losses climbed to $36 million in 1994.</br></br>""We thought we had a cat in our books, but we really had a tiger,"" said Reinhard Blei, the company's treasurer, who took control of the funds after the CFO resigned."