Bermuda-based Scandinavian Re has stopped writing any new business after the bottom line of its parent company, ABB Ltd., was hit by a multimillion dollar bill for new accounting practices.

And because of the $295 million charge ABB took, as well as an increase in the number of claims on specialty finite books, Scandinavian Re no longer holds certain cash reserves for unpaid losses, according to a report by ratings agency A.M. Best.

And the US ratings agency also downgraded Scandinavian Re, a finite reinsurer, from A plus (Superior) to B (Very Good), in the wake of the uncertain future of ABB.

It said that Scandinavian Re was "no longer holding certain reserves for unpaid losses and loss adjustment expenses on a discounted basis".

UK-based Reinsurance magazine will also publish next week in its March edition a report by its editor, Janina Clark, about Scandinavian Re being forced to stop underwriting because of its parent company. Ms Clarke said in the story: "ABB is listed on the New York Stock Exchange last year and must now comply with the more onerous accounting requirements of the US Securities and Exchange Commission, which only allows reserves to be discounted if they are `reliably determinable'."

The report also states that ABB was unable to discount Scandinavian Re's reserves, and the parent company had to take a $295m non-cash charge on its 2001 accounts.

Scandinavian Re ceased to renew existing business and write new business at the end of last year. A.M. Best said the A plus (Superior) financial ratings of Sweden-based Sirus International Insurance Corporation and Sirus America Insurance Company Ltd in New York have also been placed under review, following Scandinavian Re's financial results, AM Best said. Its future is now being reviewed, since any business it writes will create additional charges in ABB's accounts. AAB is the parent company of Sirus International, which included Scandinavian Re. At the end of 2001, in its year end accounts, the total combined insurance loss of ABB for both Scandinavian Re and Sirius International came to $138 million and came from increased claims in their specialty finite reinsurance book.

In addition, a further $295 million non-cash charge was made to the ABB consolidated accounts "reflecting the effect of Scandinavian Re no longer holding certain reserves for unpaid losses and loss adjustment expenses on a discounted basis".

The group was due to release its 2001 results this month.

In 2000 Scandinavian Re made an underwriting loss of $18.5 million and an overall profit of $8 million on net written premiums of $366 million. Excluding Scandinavian Re, Sirius made an underwriting profit of $22.5 million and an overall profit of $66 million on net written premiums of $283 million.