Bermuda-based Ram Holdings Ltd. has responded to Moody's Investors Service ratings action following the downgrade of Ram Reinsurance Co. Ltd.'s financial strength rating (FSR) from Aa3 to A3, from Aa3.

In the same rating action, Moody's also downgraded the rating of the preference shares of Ram Holdings Ltd. to Ba1 and the rating of Blue Water Trust, a related contingent capital facility, to Baa3.

Moody's said that its rating action reflects its views on Ram Re's overall credit profile in the current environment, including increased expected and stress loss projections among its mortgage-related risk exposures and significantly constrained new business prospects. The ratings agency also said that it will continue to review Ram Re's rating for further possible downgrade.

"While we are disappointed by Moody's action, we believe we reduced the overall risk profile of our insured portfolio with the previously announced commutation with XL Financial Assurance," Ram chief executive officer Vernon Endo said.

"We will be working with our customers to confirm the ongoing value of our reinsurance. In that regard, we also intend to work closely with Moody's on establishing the reinsurance credit we provide to each of the primaries, given the recent downgrades."

Ram said it will continue to pursue a number of alternatives to improve its capital position and the risk profile of its insured portfolio including commutations of risks. But due to current market conditions it does not expect to raise new capital at the moment.

Ram said its strategy remained subject to change, and there could be no assurance that Ram would be successful in maintaining its current treaties in effect, writing new business, improving its capital position or improving or maintaining its current rating from Moody's.