Troubled Bermuda reinsurer Centre Solutions has been hit with its second ratings blow in a week.

On Tuesday, leading rating agency Standard & Poor?s lowered Centre?s ? a company effectively put into run off late in 2002 ? counterparty credit and financial strength ratings to ?BBB-? from ?A-?.

Last Friday, ratings agency A.M. Best lowered the company?s ratings.

S&P first lowered Centre?s ratings on February 18 and again this week, citing concerns that parent company Zurich Financial Services had not guaranteed to back Centre?s in force contracts should its reserve levels prove inadequate.

Centre?s ratings were kept on ?developing? credit watch status, indicating that they could either be raised or lowered.

This week?s downgrade comes after S&P credit analyst Karole Dill Barkley warned in February that further downgrades were on the cards if measures were not put in place by Zurich to cover Centre contracts still in force.

?The ratings will be removed from credit watch and affirmed or raised following the execution of explicit parental support (from Zurich Financial Services) which is expected over the next month.

?If the agreement is not executed, the ratings could be lowered again,? Mrs. Dill Barkley said last month.

However, a guarantee from Zurich Insurance Co. (ZIC) for contracts written by Centre Reinsurance (US) Ltd. (CRUS) to honour all payment obligations arising under the terms of any and all insurance and reinsurance contracts prompted S&P to raise that subsidiary?s financial strength rating to ?A+? from ?A-?. Because of the guarantee, S&P also withdrew its ?A+? counterparty credit rating for CRUS, and moved the ratings from creditwatch status to a stable outlook.

Centre?s downgrades last month, and again this month, were said to be based on the company?s poor operating performance, weakened capitalisation, and continued concerns about Centre?s reserve adequacy.

Mrs. Dill Barkley concluded: ?The ratings previously reflected the expectation that ZIC would provide formal support in the form of a net worth maintenance agreement or guarantee of all rated subsidiaries. The ratings on Centre were lowered because ZIC has elected to only guarantee one subsidiary, Centre Reinsurance (US) Ltd.?

The ratings on Centre were said to reflect S&P?s present view of the consolidated financial strength of the group and are subject to further rating actions as the companies? assets and liabilities are evaluated on a stand-alone basis. The ratings remain on watch with a developing outlook pending the assignment of stand-alone ratings and further evaluation of forms of capital support that are expected to remain in place.

S&P also said that Centre?s operating performance over the past two years had been weak, with net losses of $625 million wiping out cumulative retained earnings at the beginning of 2002. Through the third quarter of 2003, Centre realised a net loss of $432 million, including reserve charges of $485 million.

The agency added that the commitment of Zurich Financial Services to Centre?s already much reduced business is uncertain because large parts of the business are in run-off.