A.M. Best Co. announced that it has downgraded the financial strength ratings to ‘B’ (Fair) from ‘B+’ (Very Good) of Bermuda- based Commercial Risk Reinsurance Company Limited and its U.S. subsidiary, Commercial Risk Re-Insurance Company of Burlington, Vt. Both companies are subsidiaries of the Bermuda holding company, Commercial Risk Partners (CRP).
The downgrade follows earlier announcements from France’s SCOR Group, CRP’s parent company, that it has reached a commutation contract that will result in a 40 percent reduction in CRP’s portfolio. (See IJ Website Dec. 2-3). Best had noted that it expects SCOR to continue its efforts to reach such agreements in winding down its interest in CRP.
Best said the rating outlook on both companies has also been changed to stable from negative. “These rating actions reflect the precipitous decline in capital of Commercial Risk Partners in the third quarter of 2003,” said Best, “resulting from further reserve strengthening during the quarter combined with a decline in unrealized gains which together have reduced the company’s risk-adjusted capital to a level that no longer supports a secure rating.”
Best also indicated that its rating actions had taken into account the “weak historical and prospective operating performance as well as the limited market profile due to the runoff status of both companies.” It added that the rating “is contingent on A.M. Best’s expectation that a commutation contract that has already been negotiated will be finalized by the end of 2003 and that Commercial Risk Partners will maintain consolidated risk-adjusted capital commensurate with its Fair rating. Subsequent rating actions may be warranted if these expectations are not met or maintained.”
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