Bermuda-based Trenwick Group Ltd. announced yesterday that it has entered into an agreement with Berkshire Hathaway to increase the total premium capacity of Trenwick managing agents' Syndicate 839 at Lloyd's for the 2002 year of account by $212 million to $512 million.

Berkshire Hathaway will provide a $93 million increase in Syndicate 839's Lloyd's underwriting capacity through additional Lloyd's funding and a $119 million increase in Syndicate 839's Lloyd's underwriting capacity via a qualifying quota share reinsurance facility, the company said.

These arrangements have been approved by Lloyd's.

W. Marston Becker, acting chairman and acting chief executive officer, stated: "I am pleased to have this endorsement of Trenwick Managing Agents' business by a respected industry participant."

Michael Watson, chairman of Trenwick Managing Agents, said, "I am delighted that Berkshire Hathaway has agreed to support the Trenwick team at Lloyd's. It enables us to underwrite more business in 2002 and benefit from the continuing favourable market conditions at Lloyd's."

Earlier this week, Moody's Investors Service announced that it had lowered the debt and financial strength ratings of Trenwick and its rated subsidiaries senior debt to Ba3 from Ba2, and the ratings remain on review for further possible downgrade.

In its rationale for downgrade, Moody's said Trenwick's operational leverage had increased significantly as a result of increasing loss reserves and reinsurance recoverables during 2002.

While Moody's expects firming conditions in the reinsurance market to improve the company's future earnings, the extent of expected improvement may not be sufficient to address the level of increased balance sheet risk over the medium term. Moody's also cited a number of operating challenges for the group, including uncertainty about the group's continued access to the Lloyd's market, constrained financial flexibility due to its significantly depressed market valuation and competition from new and existing well-capitalised reinsurers.