Fitch has downgraded the long-term and senior debt ratings of Montpelier Re to 'BB' from 'BBB-' and the insurer financial strength (IFS) rating to 'BBB' from 'A-'. The ratings agency said all ratings remain on rating watch negative.
Fitch said the rating actions follow Montpelier Re's announcement of an $875m net loss for the third quarter. The net loss includes $950m of losses related to Hurricanes Katrina and Rita.
Montpelier Re also announced that it incurred a further $75m to $85m of losses as the result of Hurricane Wilma, which occurred in the fourth quarter.
Fitch noted that these losses are materially higher than Montpelier Re's prior estimate of $450m to $675m for Hurricane Katrina.
In total, the 2005 hurricane season has generated over $1bn of losses for Montpelier Re. Fitch said it was concerned by the magnitude of this loss, which represents 70% of the reinsurers equity as of 30 June, 2005.
Fitch said it considers such a concentration of risk to be inconsistent with the profile of an insurer in the 'A-' range.
It added that the two-notch downgrade in the rating is less reflective of near-term capital levels, and more reflective of its lack of confidence in Montpelier's future performance.
