Ratings agency AM Best this week downgraded Markel as the insurance giant unveiled a major restructuring operation for its Lloyd's operations.

Markel, the parent company of several Lloyd's syndicates including 329, 554, 929, 1227 and 1228, has had its financial strength rating reduced from A (excellent) to A- (excellent).

Following the restructuring, Markel 1228's capacity will be pegged back from £82m in 1999 to just £30m in 2001. The syndicate will no longer write high street motor (except on a delegated authority basis) and its overseas contracts business will also be stopped.

Marine syndicate 329 will also cease to write business from next year as Markel consolidates its book within its more successful marine syndicate, David Hope 1009.

AM Best said Markel's reserving strategy, the cost of discontinuing Lloyd's syndicates and weather-related losses had contributed to the downgrade.

The ratings agency said: "AM Best expects Markel International will continue to be challenged over the near-term by the inadequate pricing and weak underwriting controls."

But Markel said the downgrade was a reflection of the pro-active work the group had carried out.

Chief operating officer Jeremy Cooke said: "We've taken the corrective action we needed to take. We've shot ourselves in the foot by putting up the proper levels of reserves."

In 1999, Markel wrote around £480m through its Lloyd's operations. In 2000 that will reduce to £355m and next year, capacity is expected to be £320m.