Fitch Ratings has simultaneously downgraded and withdrawn the insurer financial strength ratings for The Underwriter Insurance Company.
Fitch said it had downgraded the rating from BB+ to B-, but added that it would no longer provide ratings or analytical coverage for the company.
The downgrade reflects significant further deterioration in the company’s reserves of £11.7m during 2003, contributing to a continued erosion of the capital base.
Fitch said the deterioration followed substantial reserve increases of £6.4m and £16m being required during 2001 and 2002 respectively.
The Underwriter's rating reflects the uncertainties that persist on reserving adequacy and risks to the capital base if assets prove not to be fully recoverable. The existing capital base is considered to be weak relative to the risks that have still to run-off, said the ratings agency.
Fitch said it believed the uncertainty over reserves and the full recoverability of assets, particularly given the company’s low capital base, has left the Underwriter Insurance Company in a weak position.
Insurers rated in the 'B' category are viewed as weak with a poor capacity to meet policyholder and contract obligations, said Fitch. Risk factors are very high, and the impact of any adverse business and economic factors is expected to be very significant.
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