A.M. Best has downgraded the financial strength ratings to “B+” (very good) from “B++” (very good) of Commercial Risk Reinsurance Co. Ltd., based in Bermuda, and its U.S. subsidiary in Vermont, Commercial Risk ReInsurance Co. Both ratings have been removed from under review and assigned a negative outlook. The companies are the operating subsidiaries of the Bermudian holding company, Commercial Risk Partners Ltd., which is owned by Paris-based SCOR.
These rating actions reflect Best’s view of the companies’ consolidated risk-adjusted capitalization. They also consider large operating losses in 2002 and continued losses in the first half of 2003 on a consolidated basis, as well as inter-company balances with SCOR, whose financial strength rating was recently downgraded to “B++” (very good). The negative outlook reflects the uncertainty arising from the run-off of liabilities and commutations of the companies’ business following the adverse development of reserves registered in 2002. In Jan. 2003, SCOR announced that it was placing the companies in runoff and seeking to sell them during the course of 2003. However, a sale does not appear imminent, as negotiations have become protracted. Nevertheless, the ratings recognize the significant actions taken by SCOR to minimize the companies’ reserving risks. These include a large commutation, which has helped reduce the companies’ consolidated risk capital requirements by reducing loss reserves by nearly 20 percent.
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