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A.M. Best Co. Inc. has downgraded to below A-level the financial strength ratings of Tower Group International Ltd. and its affiliates, the rating agency said in a statement Tuesday.
The financial strength rating was cut to B++ from A-. A downgrade below A- usually means that brokers must obtain a client sign-off before placing risks with an insurer.
The downgrade is yet another blow to Tower, which earlier Tuesday said it was bolstering its loss reserves by approximately $365 million and taking a $215 million goodwill impairment, both of which were cited by A.M. Best in its subsequent announcement.
At the same time, the rating agency also downgraded the issuer credit rating and debt rating on $145.4 million of 5% senior convertible notes, due 2014, to “bb” from “bbb-” of the intermediate holding company Tower Group Inc. Also, Best lowered the financial strength rating to B++ from A- and issuer credit rating to “bbb” from “a-” of CastlePoint Reinsurance Company Ltd. (Bermuda).
Tower Group International Ltd. (Bermuda) was assigned an issuer credit rating of “bb.’’ All companies are under review with negative implications.
“A.M. Best believes Tower will be challenged to restore shareholder confidence, both in the near and long term,” the ratings agency said in the statement adding that “the negative rating implications assigned to Tower reflect the potential for further adverse reserve development, increased competitive challenges and, due to the ratings downgrade, potential actions taken by third party reinsurers and lenders.”
The Tower U.S. Pool includes: CastlePoint Insurance Company; CastlePoint National Insurance Company; Tower Insurance Company of New York; Tower National Insurance Company; Preserver Insurance Company; North East Insurance Company; Hermitage Insurance Company; CastlePoint Florida Insurance Company; Kodiak Insurance Company; York Insurance Company of Maine; and Massachusetts Homeland Insurance Company.