Fitch Ratings downgraded the financial strength rating of The Underwriter Insurance Company to 'BB+' from 'BBB'.
The action resolves the rating watch negative that was assigned on 25 April on concerns regarding future business volumes and mix, as well as uncertainty over the extent of near-term additional charges.
Due to the uncertainty surrounding the run-off of the
company's liabilities, which are likely to exceed five years, Fitch said that there is a possibility that the company could have insufficient funds to extinguish all of its liabilities.
Fitch said that reserves deteriorated by £15.9million during 2002 and the first quarter of 2003 and additional reserve development remains a possibility. It said that a further deterioration in net reserves of 10%-15% over the run-off period could make it difficult for the company to meet its obligations in full.
At the end of 2002, the company had capital of £46m with net reserves (including claims expenses and unearned premium) of £185m.
