Bermuda-based reinsurer Montpelier Re may slow the pace at which it writes business because of ?softening? market conditions, according to a ratings report released late Tuesday.

Leading ratings agency Standard & Poor?s announced it was reaffirming the ?A-? counterparty credit and financial strength ratings it had previously set for Montpelier Reinsurance Ltd. and said one of the reasons was the expectation that Montpelier would carefully guard underwriting discipline even though that could mean turning down some business in 2005.

This news follows predictions by underwriters last week at the PLUS (Professional Liability Underwriting Society) conference that they also could back off business if the market continued on its current course, where rates for certain lines of re/insurance coverage are coming down at a rapid rate.

Many in the industry have pointed out that the market appears to be going into the ?soft? part of the cycle (where prices drop and insurance capacity is plentiful) after hard market conditions (where coverage fetches a higher price on the back of limited capacity) had prevailed since 2001.

The shift means that some insurers will limit or cease writing, at least along lines seeing the greatest pricing decreases, in order to maintain the profitability of their re/insurance operations.

In its report, Standard & Poor?s (S&P) also said that it affirmed Montpelier?s ?BBB? counterparty credit rating. The outlook in both cases is stable, or unlikely to change.

Standard & Poor?s credit analyst Damien Magarelli said: ?The ratings on Montpelier reflect its market position and scale within the Bermuda reinsurance market, strong operating performance, and strong financial flexibility. Its capital adequacy is also viewed as a strength to the rating.?

But Mr. Magarelli added: ?Offsetting these positive factors are Montpelier?s limited track record, concentrated management team, and high risk for catastrophe losses.?

The S&P said the company?s stable outlook was based on the view that: ?Montpelier is expected to maintain strong earnings through 2004 and capital in excess of that required for the rating.

?In addition, Montpelier is expected to maintain underwriting discipline (including slowing writings in 2005 and declining more business) as the property market continues to soften (exposures are expected to decrease in 2005).

?Montpelier?s competitive position is viewed as strong based on its market position and scale.?

The ratings agency said that based on total equity, Montpelier ranks amongst the top ten Bermuda-based reinsurers.

Montpelier?s market position is also supported by its strong operating performance and a competitive advantage in ?not having to cope with legacy issues related to balance-sheet integrity?, it said.

In 2003, Montpelier had net income of $407 million, a substantial increase from $152 million in 2002.

The company also this month reported on its first quarter earnings, which grew to $109 million compared to $103.8 million during the same period in 2003.