AM Best has downgraded the financial strength rating of Montpelier Reinsurance to A- (excellent) from A (excellent) and the issuer credit rating (ICR) to “a-” from “a”.

At the same time, AM Best has downgraded the ICR of Montpelier Re Holdings to “bbb-” from “bbb” and has downgraded all existing debt ratings.

Ratings have been assigned to all debt securities recently filed under a $1bn shelf registration. All ratings remain under review with negative implications.

AM Best said the downgrades are attributable to deterioration in Montpelier's risk-adjusted capitalisation following losses incurred from Hurricanes Katrina and Rita, which accounted for a substantial level of the company's shareholders' equity at 30 June, 2005.