Ratings agency A.M. Best Co. has posted a ?negative? outlook on its A minus excellent rating of the London-based The Steamship Mutual Underwriting Association.

This rating also affects the Steamship Mutual Underwriting Association (Bermuda) Ltd. and The Steamship Mutual Trust.

Best said the rating also ?reflects the transfer of risk to Steamship Bermuda through a reinsurance contract, the protection provided by membership of the International Group of P&I clubs and excellent prospective operating performance?.

It said that offsetting factors include volatility in risk-adjusted capitalisation for the Steamship group as a whole.

Steamship London cedes 90 percent of its gross premium to Steamship Bermuda through an annually renewable reinsurance contract.

Steamship Bermuda, in turn, reinsures all its retained risks with the Trust, where the premiums are invested. Members of Steamship London ? like members of Steamship Bermuda ? are beneficiaries of the Trust.

Additionally, Steamship London benefits from protection provided by the International Group reinsurance pool as a separate member.

Best said the company had excellent prospective operating performance and expected a profit after tax of approximately $4.5 million for the current year to February 20, 2004. And it said in a report released yesterday that Steamship London was expected to accumulate significant free reserves from operating profits generated while the company is protected by a stop-loss reinsurance policy provided by Steamship Bermuda and the stop-loss policy for the current year limits net claims to a maximum of $1.5 million, added Best.

But it pointed to the volatility in risk-adjusted capitalisation and the volatility inherent in Steamship Bermuda?s risk-adjusted capitalisation applies to Steamship London due to its dependence upon reinsurance protection provided by Steamship Bermuda.

?A.M. Best believes that against a background of investment and claims volatility, Steamship Bermuda will find it challenging to maintain its existing risk-adjusted capitalisation level,? said the release.