Best Downgrades Ratings of Centre Solutions

A.M. Best Co. announced that it has downgraded the financial strength ratings to ‘A-‘ (Excellent) from ‘A’ (Excellent) of Bermuda-based Centre Solutions (Bermuda) Limited and its operating subsidiaries, units of the Zurich Financial Services Group. It also said that the ratings “remain under review with implications changed to developing from negative.”

“The downgrade reflects Centre’s diminished capital profile and more recent lackluster operating performance due to continued adverse loss reserve development in its discontinued lines of business,” said Best. “The company’s capital has declined significantly since December 31, 2002, following the announcement that credit enhancement and life/health lines of business were being placed into run-off. Centre’s new focus will be on business opportunities exclusively in the area of structured risk property/casualty insurance and reinsurance.”

The rating agency noted that, following a thoroughgoing review of its reserves, Centre has “recorded reserve strengthening of approximately $485 million through September 30, 2003, in addition to impaired asset write-offs and restructuring charges. Capital has declined from $914 million at December 31, 2002, to approximately $620 million at September 30, 2003.”

Best explained that keeping the group under review status “reflects uncertainty with regard to the level and nature of capital support to be provided to Centre from its parent company.” It also indicated that in its opinion “additional capital support will be necessary not only to enhance Centre’s market position as a provider of structured risk insurance and reinsurance solutions but also to mitigate the continued potential for additional adverse reserve development in discontinued classes of business.”

The under review status will be continued until a further review of Centre’s current loss reserve position and finalization of the capital support provided to Centre from ZFS has been completed, said Best.

It listed the companies affected by the ratings downgrade as follows:
· Centre Insurance International Company
· Centre Reinsurance International Company
· Centre Reinsurance Limited
· Centre Solutions (US) Ltd
· CentreLine Reinsurance Limited
· Centre Solutions (Asia) Ltd
· Centre Insurance Company
· ZC Specialty Insurance Company
· Centre Life Insurance Company