The original investors in Olympus Re have been wiped out, said White Mountains chairman Jack Byrne this week. His comments come just days after the Bermuda-based company announced it would reimburse Olympus Re for up to $137 million in revised hurricane losses.

When it formed in 2001, Olympus Re ? a 'sidecar' reinsurer ? was supported by investors including Mr. Byrne and White Mountains president Steve Fass.

Concerns about whether those executives and other parties related to White Mountains still had stakes in Olympus Re came up during a conference call which was scheduled to discuss White Mountains announcement that it had upped its hurricane losses by $203 million.

Under a 2005 quota share reinsurance treaty, its Folksamerica unit was to cede $143 million of that loss to Olympus Re, however White Mountains announced that since the move would erode the bulk of Olympus' capital it had agreed to reimburse Olympus Re with up to $137 million of the losses. The move will knock $197 million off White Mountains' second quarter pre tax earnings.

Mr. Byrne told analysts and investors, however, that all of the original investors lost their financial stake after Olympus Re was hit by heavy losses from the 2005 hurricane claims under its agreements with White Mountains' units Folksamerica Reinsurance Co. and Sirius International Insurance Corp.

"None of the original investors have any significant stake at all. We have been wiped out," said Mr. Byrne who added that he took no great pleasure in making the announcement since all of the investors were "friends" of the company. "I haven't even told my wife yet that her investment is wiped out. That happens to be the truth. I hope Dorothy is not listening. It is a very sad chapter in a long career."

He added that the Olympus reimbursement was "100 percent" in the best interests of White Mountains shareholders and that the loss would also have been a bitter pill for new Olympus investors to swallow since they only came into Olympus "based on year end estimates that have proven to be inaccurate very quickly".

The decision has, however, caused questions at the ratings agencies. A.M Best downgraded Folksamerica noting the reimbursement decision increased its concerns about the company's earnings and risk-management capability.

Robert DeRose, a vice president at A.M. Best, told CBS Marketwatch that the decision to reimburse Olympus Re may have been part of an agreement with the new investors who capitalised the firm.

"I don't know for sure, but White Mountains may have gone to these investors in December and asked them to recapitalise Olympus, suspecting that there was potential for" more losses from the 2005 hurricane season, he said. "Olympus may have told these investors that if that happened, they would make Olympus Re whole again."

Yesterday, Standard & Poor's Ratings Services placed Folksamerica's and Sirius' ratings on CreditWatch with negative implications over concerns about enterprise level risk management and risk mitigation capabilities. It also had questions related to the indemnification agreement and noted that the subsidiaries relied heavily on third party catastrophe models to manage catastrophe risks, which failed to fully assess the magnitude of their potential property catastrophe losses.

During the conference call, White Mountains executives said they had moved to manage risks. The company had gone from being a significant catastrophe reinsurer in the Gulf Coast offshore energy market to dropping out entirely.

"The market looks very good so it is painful for us to come to conclusion we don't want to play very aggressively, we want to go back to our roots. Yes it is painful and yes others will step up to table and we hope they will do well but it just is not our ballgame anymore," said Mr. Byrne.

He added that going forward, Folksamerica would be a "generalist reinsurance company with probably no more than 20-25 percent of business focused on property catastrophe."

Management is also moving to improve its ability to measure its risk exposure and balance its exposure to the various lines of business its participates in. As a result, the company expects to be less dependant on outside modelling technology and invest in systems and process to ensure its exposures are well monitored.

"We aren't going to try to reinvent the modelling business and I have no intention of starting another company in that arena however we have every intention to be as comfortable as we can be that we have our own exposures well monitored," said new president of White Mountain Re Group Ltd. Tom Hutton .