Olympus Reinsurance Co. Ltd., a Bermuda reinsurer doing business with White Mountains Group, was on Friday assigned a vulnerable financial strength rating by A.M. Best Co., after 2005 storm losses wiped away most, if not all, its capital.

Olympus? financial strength rating was knocked down two notches, from B+ to B-, considered a vulnerable rating under a system used to assess insurers ability to pay claims. The rating was also assigned a negative outlook, meaning a further downgrade had not been ruled out. The ratings of A.M. Best are widely followed by insurance buyers.

After the downgrade, the reinsurer, which has offices in Cumberland House, Victoria Street, asked A.M. Best to remove the rating and to no longer keep the company under its review.

Olympus is a ?sidecar? reinsurer, established to provide reinsurance capacity to a larger reinsurer ? White Mountains.

Olympus, capitalised with $500 million when formed in 2001, lost at least $600 million in 2005 after being hit by heavy losses from hurricane claims under its agreements with White Mountains? units Folksamerica and Sirius. At the end of 2004, Olympus had about $650 million in capital, according to president Sheila Nicoll last year.

In early 2006, Olympus raised $156 million, enabling it to continue doing business with White Mountains, but on a much smaller basis. A second reinsurer, Helicon Re, has also been formed to provide reinsurance capacity to White Mountains.

Between them, Olympus and Helicon ? both named for Greek mountains ? have about $330 million in capital, White Mountains said.

Olympus? $600 million 2005 loss is revealed in a regulatory filing by Leucadia National Corporation, which was until this year one of the company?s largest investors. As a privately-held company, Olympus has issued no information on its 2005 losses. Leucadia, a 20 percent owner of Olympus, said it realised a $120.1 million loss from its investment in the Bermuda reinsurer last year.

Leucadia did not add money when Olympus raised additional capital earlier this year, and now owns less than four percent of the company. Joseph Steinberg, Leucadia president, was Olympus chairman, according to information on the Olympus website, which could be out of date.

Olympus has since 2001 provided retrocessional reinsurance under quota-share agreements to Folksamerica and Sirius, two reinsurance units of White Mountains. From 2006, it will only have an agreement with Folksamerica, according to information in a White Mountains filing.

White Mountains chief executive Steven Fass did not return a call on Friday to a US office of the Bermuda-based insurance group, seeking information on whether the Olympus downgrade affects the business relationship.