Troubled Bermuda company Mutual Risk Management is now facing legal action in Bermuda's court.

The Royal Gazette has learned that two of Mutual Risk's (MRM) Bermuda-based subsidiaries - IPC Mutual Holdings Ltd. and Mutual Indemnity Ltd. - are the subject of legal action from Franklin Logistics Inc.

Little is known about the action or the plaintiff and Franklin's lawyer, Richard Horseman of Wakefield Quin, declined to speak further on the matter but did indicate that the matter was to be filed before the courts yesterday.

The news follows rating downgrades from AM Best earlier in the month for both IPC and Mutual Indemnity.

At the time rating agency AM Best announced it had placed the financial strength rating of MRM's Bermuda based Insurance Profit Center (IPC) rent-a-captive facility at C (weak) from B+ (Very Good).

The downgrade came after AM Best placed the B+ (Very Good) rating of IPC Group (Bermuda) under review with negative implications last month pending discussions with management on the collateralised nature of its loss reserves and strategic alternatives including finding another quality fronting carrier and other related issues.

AM Best reported that with no policy-issuing carrier identified to replace MRM's US-based Legion Insurance Company - which has been put in to state regulated run-off - the operations of IPC are at a standstill.

AM Best said: "Given the material operating and financial problems, the ability of the rent-a-captive companies to continue as an ongoing concern is doubtful.

"The rating action reflects the uncertainty of the present and future realisable value of the non-liquid assets of IPC, making the ability of capital to support an efficient and secure run-off of the liabilities and any asset value shortfall questionable.

"While remote, it is unclear whether all of the assets of the IPC companies are protected from the possible need to liquidate at the MRM level."