A.M. Best Co. has downgraded the financial strength rating to B++ (Very Good) from A- (Excellent) and the issuer credit ratings (ICR) to “bbb” from “a-” for the reinsurance subsidiaries of the PXRE Group Ltd.
The rating actions apply to PXRE Reinsurance Ltd. (Bermuda) and PXRE Reinsurance Company (Hartford, Conn.). A.M. Best has also downgraded the ICR to “bb” from “bbb-” and all existing and indicative debt ratings of PXRE. All ratings have a negative outlook.
The downgrades follow PXRE’s announcement that it increased its net loss estimates for hurricanes Katrina, Rita and Wilma by a pre-tax amount between $281 – $311 million.
As a result of the magnitude and composition of this most recent loss revision and with consideration of the company’s longer-term track record, A.M. Best now has greater concern regarding PXRE’s risk management capability. The most recent range of loss increase accounts for over 60% of reported actual shareholder’s equity on Sept. 30, 2005, which resulted in a deterioration of PXRE’s risk-adjusted capital position.
As a result of the 2005 storm losses, PXRE has taken actions to significantly reduce its maximum net exposure for first event, full limits in its largest zone to a more manageable level. Nonetheless, the ratings have been assigned a negative outlook until these new strategies and risk mitigation procedures have been fully tested.
Going forward, A.M. Best will closely monitor the effectiveness of the new strategies and procedures with each catastrophic event.
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