Concerns over the future of the finite risk market have landed Bermuda-based reinsurer Imagine Group on the ?negative outlook? list of insurance ratings agency A.M. Best.

Best said in a statement yesterday that it was affirming Imagine?s financial strength rating of A- (Excellent) and issuer credit rating (ICR) of ?a-? but also assigned Imagine a negative outlook, meaning a downgrade cannot be ruled out.

Imagine?s finite risk business was one of Best?s key areas of concern following an ongoing regulatory probe of use of this kind of insurance, which authorities think corporations may be using to mask losses.

Imagine Re counts the non-traditional loss mitigation product as one of its main sources of revenue.

?The negative outlook is based on the current uncertainty of the finite risk market,? Best said in a statement.

?The heightened level of scrutiny by state and federal regulators focused on finite reinsurance and contractually capped multi-year reinsurance transactions has resulted in subpoenas being issued to both sellers and buyers of finite products.?

Imagine?s business profile includes a substantial level of products that fit into these categories and as a result, present a heightened level of operational risk to the company.

The future viability of finite products will remain uncertain until current government scrutiny is complete and any new requirements regarding finite products are established.?

Imagine has received at least one subpoena from US regulators as part of the sector probe underway since last year.

Also on Best?s radar are concerns related to Imagine?s recent acquisition of Danish Re, a reinsurance group with active offices in Bermuda, London, Copenhagen and Tokyo and significant reserves associated with certain discontinued operations.

?The acquisition of Danish Re provides Imagine with a traditional reinsurance platform primarily writing worldwide business in property, accident and health and financial institutions in the Lloyd?s of London syndicate market.

Although the acquisition carries an increased level of execution risk as Imagine merges new systems and staff with existing infrastructure, the overall addition of Danish Re is complementary to Imagine?s global strategy of writing specialty insurance and reinsurance, which includes both finite risk and traditional reinsurance with contractual caps or other loss mitigating features.

Following the Danish Re acquisition, Imagine?s risk-based capital remains supportive of its current rating,? the rating agency statement said.