HAMILTON, Bermuda-The ratings of Sphere Drake Insurance (Bermuda) Ltd. and Sphere Drake P.L.C. of London may be downgraded following an announcement that the insurers will take a $45 million fourth-quarter charge to strengthen reserves.

Sphere Drake Holdings Ltd., the parent of both companies, estimates it may post a net loss of up to $50 million in the fourth quarter, due to the reserve strengthening and claims from Hurricane Marilyn, which struck the Caribbean last September. For the full year, the company expects a net loss of up to $18 million.

The announcement follows the sudden departure of Ian Dean as president and chief executive officer of Sphere Drake last month (BI, Jan. 1). Mr. Dean, who resigned for "personal reasons," was replaced by Michael Watson, formerly chief financial officer of Sphere Drake.

Mr. Dean's departure was followed shortly by the previously planned retirement of Jonathan J. Crawley as president of Sphere Drake Underwriting Management (Bermuda) Ltd. He was replaced by Bruce M. Jones, who had been senior vp (BI, Jan. 8).

Bold financial moves are common after management changes, noted David Anthony, an analyst at Standard & Poor's Corp. in London, which has placed Sphere Drake's BBB+ rating on CreditWatch with negative implications.

"We were a little surprised at the action, but new CEOs often do big housekeeping jobs when they come into the job," he said.

S&P will consult with Sphere Drake management on why it is adding to what the S&P thought were adequate reserves, Mr. Anthony said. "But we have no reason to believe that there is any 'black hole,'*" he added.

The reserve increase also led A.M. Best Co. to place its B+&@#43; rating under review with negative implications, said Selina Man, senior financial analyst in Oldwick, N.J.

"My concern is that it will affect their flexibility and their ability to raise additional capital if they need to in the next few years," she said.

However, the move was typical of Sphere Drake, Ms. Man said. "It is a company that stands out by always confronting bad news head-on so we never fear that they are hiding a much worse picture."