Finite reinsurer Inter-Ocean Holdings Ltd.?s operating subsidiaries received a ratings downgrade from A.M. Best, which citred concerns over the company?s level of shareholders equity and the increased scrutiny finite reinsurance is receiving from US regulators.

A.M. Best said last week it had downgraded the financial strength rating to A- (Excellent) from A (Excellent) and the issuer credit rating to ?a-? from ?a? for the reinsurance subsidiaries of Inter-Ocean Holdings Ltd. (Inter-Ocean) (Bermuda).

The ratings apply to Inter-Ocean Reinsurance Company Ltd. (Bermuda) and Inter-Ocean Reinsurance (Ireland) Ltd. Additionally, A.M. Best said it had downgraded the issuer credit rating to ?bbb-? from ?bbb? of Inter-Ocean. All ratings have a negative outlook.

These rating downgrades were a result of the February 17, 2005, rating action taken by A.M. Best on one of Inter-Ocean?s principal retrocessionaires, American Re-Insurance Company. American Re?s financial strength rating was downgraded to A (Excellent) from A+ (Superior).

?Despite these actions, Inter-Ocean?s ratings remain at the Excellent level, reflecting its non-risk retaining operating structure and the support it receives through its strategic relationships with its sponsoring shareholders who are comprised of recognised leaders in the insurance and reinsurance industries,? Best said.

?Offsetting these strengths are the risk-adjusted capital position of the group, which has diminished in recent years as the credit worthiness of some its most active retrocessionaires has been weakened.?

Best added it was concerned that Inter-Ocean?s relatively modest level of shareholders? equity will not be adequate to support further increases in its credit exposure or rating downgrades of its principal retrocessionaires.

?Additionally, the outlook is reflective of the increased regulatory scrutiny that the finite reinsurance market is experiencing and the impact this may have on Inter-Ocean?s ability to generate deal flow.?