The future of Swiss-based reinsurer Converium is at risk after Standard & Poor's (S&P) downgraded its financial strength rating by two notches from A- to BBB, on the eve of the Monte Carlo Rendezvous.
But S&P credit analyst Stephen Searby said that the rating could be upgraded to BBB+ if Converium's proposed rights issue went ahead and there were no further adverse developments.
Searby said he had concerns about the "stickiness" of Converium's clients in light of the downgrade, as many cedants viewed any rating below A level as inadequate.
AM Best also downgraded Converium. London general manager Jose Sanchez-Crespo said that the company's ability to maintain its current rating (the equivalent of BBB) was based on the ability of Converium's management to execute the restructuring strategy it had outlined.
Sanchez-Crespo said it was "a given" that Converium would lose business as a result of the downgrades. He said that last year's downgrade of French reinsurer SCOR from A to B level resulted in the company losing 35% of its business, albeit in different market conditions.
