Lloyd's syndicates Limit 79, St Paul and Cottrell & Maguire have been downgraded by Moody's Investors Service.

The ratings agency has also placed Alleghany and Markel under possible review.

Moody's said Limit Underwriting, which is owned by QBE, and Cottrell & Maguire are unlikely to perform in line with the Lloyd's Market average in the next cycle and has now lowered the syndicates' ratings from B (average) to B- (below average).

Both have cut their capacity by between a quarter to a third since 1999 and the ratings agency said it was “uncertain” over the level of commitment from Cottrell & Maguire's two members agencies, which provide 96% of its capital backing.

St Paul Syndicate Management was also downgraded from B to B- following fears it would record a loss for 2000. Syndicate 227, which has recorded mixed results over the past few years, has recently revised its 1999 forecast to a loss of 22% of its capacity.

In addition, Alleghany Underwriting, which has a B rating, is under review after it posted poor results. It recently announced a loss of 29% for the 1998 account, with a loss of 6% forecast for the following year.

Markel Syndicate 1009 may also be downgraded from its B+ (above average) rating, as the market reacts to the resignation of underwriter David Hope, who had been with the company since 1994.

Hope left the energy- and aviation-orientated syndicate last month, over differences with management on underwriting philosophy and future strategy.

Robert King, marketing manager for Lloyd's Market Services at Moody's, said the decision to downgrade the syndicates was based on Lloyd's Syndicate Quarterly Returns, which have just been published.

He said some managing agents have had to adjust their predictions as they thought the market had hardened more that it actually had.

But he added: “When the market does improve, we expect some ratings to turn the other way.”

Meanwhile, Moody's upgraded syndicate 456 from B- to B, on the expectation that the Limit syndicate, which also receives most of its financial backing from QBE, will meet the market's results over the cycle.

It is believed the syndicate is now operating in a more stable environment and can trade forward as an autonomous unit.