subsidiaries Tempest Reinsurance Co. Ltd. and ACE USA to "A-plus''.

Tempest, which ACE purchased in July 1996, was upgraded from an "A'' rating and its outlook was revised to stable from negative by S&P. The rating follows the acquisition by ACE of CAT Ltd. in April this year and the company's subsequent contribution to Tempest's bottom line.

S&P stated the upgrade reflected Tempest's core status within the ACE group.

Tempest, with capital of $733.7 represents about 26 percent of consolidated shareholders equity at March 31. S&P also noted Tempest's strength in the global property-catastrophe market.

"Tempest, in combination with CAT Ltd., provides significant market presence, with pro forma combined net premium written of $247.2 million for fiscal 1997,'' S&P stated. "Writings are diversified with approximately 67 percent related to US risks and the balance related to developed countries worldwide.

The mix of business is improved, with Tempest writings skewed towards high severity, low frequency national exposures, and CAT writings closer to working layer regional risk.'' The company's sophisticated modelling capabilities, strong operating performance and expectation of improved capital adequacy were other factors S&P considered in the rating.

S&P said Tempest's monoline focus on the property catastrophe business made the company susceptible to volatile operating results, but this factor was offset by ACE's increasing diversification of business.

ACE USA's upgrade from "A minus'' to "A plus'' was based on the subsidiary's role in the group's book of business. ACE USA, formerly Westchester Specialty Group, has evolved from a "primary umbrella market'' to a specialty property writer with 13 percent of net premium written from casualty lines, according to S&P. ACE Ltd. purchased Westchester in 1997.

"As the newly acquired US platform for ACE Ltd., ACE USA has begun a diversification effort to become a specialty multiline commercial carrier,'' S&P stated.

The upgraded rating was based on the strength of the ACE group, profitable underwriting results over the past five years, and a diversification effort.

"Weak historical underwriting performance remains a concern, but is mitigated by the underwriting oversight and management controls of its new parent company, and through increased reliance on reinsurance support,'' S&P continued.