Independent Insurance's ratings have been dropped by both Fitch IBCA and Standard & Poor's amid allegations that claims were not entered into the company's accounting systems.
Independent refused to comment both on the ratings drop and the allegations, but Fitch warned that the company could avoid run-off only through merger with or acquisition by a major insurance company.
Standard & Poor's has lowered the company's counterparty credit and insurer financial strength ratings from triple-B+ to double B.
It has also revised Independent's Creditwatch implications from developing to negative.
It said the drop followed Independent's failure to complete its capital raising plans and the subsequent temporary suspension of business.
"The double-B rating reflects the company's weakened capital position, in addition to its significantly damaged business reputation, that will be difficult to recover from," the agency said.
Fitch downgraded Independent's insurer financial strength rating from BBB to B, with a negative outlook.
It said: "Further reserve deterioration cannot be ruled out and Fitch believes this could have a significant impact on the solvency of the company."
Fitch said the uncertainty surrounding Independent's technical provisions remained a serious impediment to its chances of merger or acquisition.
"Fitch recognises that the vast majority of insurance companies placed into run-off in this market have ulti
