Bermuda-based Lehman Re was downgraded after its parent company Lehman Brothers Holding Inc.'s shares plummeted 42 percent to close at $4.22 yesterday (read more on page 23).

The reinsurance subsidiary of Lehman Brothers saw its financial strength rating (FSR) donwgraded to A- (excellent) from A (excellent) and the issuer credit rating (ICR) to "a-" from "a" by AM Best Co.

The outlook for all ratings has been revised to negative from stable.

While the financial condition of Lehman Re is currently unaffected by challenges at the parent company, Best's growing concern regarding the potential impact on Lehman Re due to perceived financial difficulties at Lehman Brothers has prompted these rating actions.

The rapid deterioration in investor confidence generates uncertainty as to the ability of the parent to raise capital to support Lehman Re, if needed, Best said.

While Best believes that Lehman Re's current stand-alone capital position adequately supports its ratings, the negative perception surrounding the parent company may potentially impact Lehman Re's ability to attract and retain business.