After more than six months of searching for a way to stay afloat, Quanta Capital Holdings is to close all but two of its units to new business.

Quanta will put into run-off Bermuda, US and European units that sold speciality types of insurance and reinsurance, from professional liability to fidelity and crime coverage.

Its Lloyd?s of London operation, Syndicate 4000, and an environmental consulting business, ESC, are to continue in business. The right to renew contracts with clients already having bought environmental liability policies from Quanta is being transferred to Liberty International Underwriters, a unit of Liberty Mutual. Neither party disclosed the terms of the agreement.

The three-year old Bermuda insurer, crippled by hurricane losses over the past two years, is also bracing for another possible cut to its credit rating, management said late on Thursday.

A.M. Best, the only ratings firm to track the company?s financial strength, said on Friday that it still had the company?s rating on negative watch, signalling a possible downgrade. The firm will make a final decision after it reviews the details of Quanta?s decision to put insurance and reinsurance operations into run-off.

A downgrade will put Quanta in default with lenders, the company said. A default will bar the insurer from making dividend payments, including to preferred shareholders.

Quanta?s run-off announcements came after it had already stopped selling several types of policies, including property and marine, which were areas where insurers were badly hit last year because of damage inflicted in the Gulf Coast region by hurricanes Katrina and Rita.

?After consideration of alternatives, Quanta?s board has made a decision that it believes enables the company to best protect the value of its capital,? said chairman James Ritchie, in the statement.

An insurer that closes to new business is said to be in run-off. The net effect is a slow winding down of operations that allows claims to be met on policies already sold.

Quanta?s decision comes two weeks after Mr. Ritchie instilled new hope in investors, telling them on a first quarter conference call that a number of parties had shown interest in buying the financially troubled company. He said Quanta, which in its most recent quarter posted a net loss of $17.1 million, was ?exploring the most attractive opportunities?.

Quanta?s business prospects were called into question earlier in the year, as losses mounted and its credit rating was cut. Many customers had, or were planning, to cut ties after the insurer lost its ?A-? credit rating, on the heels of a $54.7 million fourth quarter loss announced in March.

The company didn?t say how much investors will recoup, or when they might get their money back, in the run-off. Owners of a run-off insurer can wait until the company?s wind-up to see their funds returned, and the payback is often diluted by costs and fees. It wasn?t clear if the company?s decision to effectively close all but two units will affect its trading status on the Nasdaq.

Quanta?s investors have already been badly burned by the company?s woes. Those who bought in to the company when it floated in 2004 paid $11. A string of quarterly losses had already knocked the shares but after Hurricane Katrina hit last August, Quanta?s shares lost more than half their value. And the continued losses sent the stock as low as $2.20. The shares were valued on Friday at $2.39 on the Nasdaq.

The decision to close units could help preserve the value in ESC and Lloyd?s, both units that management describe as ?viable?.

?This approach offers us the flexibility to support our syndicate in the ?A? rated Lloyd?s mar-ket and to protect the value of our ESC consulting operation, which provides us with fee-for-service business,? said Mr. Ritchie.

ESC employs more than 100 staff, while other units were staffed with 187 at the end of March. No one at Quanta responded to questions for information on how many employees will be retained during the run off period.

The company did say it continues to shave costs, including through job cuts. And it is possible that Liberty will hire some of Quanta?s staff as part of its agreement to acquire rights to the professional liability book of business, a spokesperson said in a telephone message.

An administrator may be hired to handle Quanta?s run off, and the company didn?t rule out sales or transfers of some parts of the business still being negotiated.