Bermuda-based GoshawK Re has seen its financial strength rating put under review on the back of its parent company's lingering financial woes.

Leading rating agency A.M. Best announced on Friday that its A- (Excellent) rating for GoshawK Re had been put under review with negative implications - signalling a possible downgrade - following Goshawk Insurance Holdings' announcement that it may breach its banking covenants in order to boost reserves at its Lloyd's Syndicate 102.

GoshawK Re has consistently posted strong results since it was set up on the Island in 2002, but its success has been weighed down by poor results at GoshawK's Lloyd's subsidiary which posted losses in the last two years.

Although GoshawK did post of profit of ?17.7 million in 2002, that positive result would not have happened the healthy return from its Bermuda operation, with GoshawK Re posting a profit of ?22.8 million during the year.

A.M. Best's rating action followed GoshawK Insurance Holdings having issued a profit warning in July citing poor performance of Lloyd's Syndicate 102.

That announcement forced it into a strategic review, including word that there could be a possible sell-off of the Lloyd's unit."Last week, A.M. Best underscored that its action was based on concerns at the parent company level: "Whilst A.M. Best believes Goshawk Re continues to have excellent current and prospective risk-adjusted capital, the under review status reflects A.M. Best's discussions with Goshawk Re's management regarding any revision to the group's revised financial arrangements and the potential impact that any shortfall of funding at Syndicate 102 may have on the group's overall financial flexibility."

A.M. Best added that GoshawK Re could see its A- (Excellent) rating affirmed, but that would depend on what happened to the group: "In the event that the group's financial flexibility is maintained at a level consistent with the current rating, A.M. Best would expect to affirm the rating."

Earlier this month, the Financial Times reported that analysts were blaming poor underwriting controls at GoshawK's Lloyd's Syndicate, for the poor results.

The downturn in business at Syndicate 102 has also prompted a management shake-up across the group that has also touched GoshawK Re with Andrew Gammell giving up his underwriting role at GoshawK Re to head GoshawK's Lloyd's underwriters.

In turn, Russell Brooke, who had been with ACE on the reinsurance side, was hired away by GoshawK Re to fill Mr. Gammell's shoes in the Bermuda office.