Standard & Poor's have lowered its long-term counterparty credit and insurer financial strength ratings of ZSL to single 'A' from single 'A' plus.
Following the lowering of ZFS' ratings on Friday, the ZSL ratings will remain on CreditWatch with negative implications.
S&P's analyst Paul Oates said: "The downgrade on ZSL is to maintain the one-notch rating differential between ZSL and parent company Zurich Financial Services according to S&P's group rating criteria."
Among the reasons for the downgrade, S&P's said that ZSL's already reduced risk-based capitalization is coming under strain from restructuring, a third-party actuarial review and an asset write-down.
S&P's analyst Karin Clemens said: "In the event of the successful completion of the rights issue, Standard & Poor's expects to remove the ratings on ZFS from CreditWatch and affirm them at their new level."
In addition, S&P said that ZFS was in a well-placed diversified position, and has improved its underwriting performance. However it warned that ZFS' ratings would fall further if the rights issue were not successfully completed.
