Mutual Risk Management has been hit by yet another rating downgrade, with Standard & Poors (S&P) announcing on Friday it had lowered Mutual Risk's (MRM) counterparty credit rating to double C, which it said reflected "the highly vulnerable status of existing obligations to nonpayment".

The S&P had already put the company on credit watch at the end of last year, and last week announced the company remained on credit watch with "negative implications".

The negative credit watch is said to imply that the company's creditworthiness is under review and that further rating downgrades could follow.

MRM, which is a longstanding Bermuda-based insurance and financial services firm, posted close to $100 million in losses last year.

The firm has been plagued by a string of lawsuits in recent years, and financial difficulties that seem to stem in part from difficulty in reinsurance recovery. MRM is reported to have $2.6 billion in reinsurance recoverables on its books.

After reporting hefty losses for the last year the company has been hit by rating downgrades, a slump in business, and in recent weeks its Pennsylvania-based insurers have been put in to state regulated run-off. The company was also thrown off the New York Stock Exchange - where it had been listed since 1991 - after its stock fell to below $1.

In addition, the Bermuda Monetary Authority has appointed a review team to monitor Mutual Risk's business on an ongoing basis because the company is in default under the terms of its convertible exchangeable debentures and its bank credit facilities.

The S&P in announcing the latest rating downgrade said: "It is not clear whether further sales of assets will yield sufficient proceeds to satisfy indebtedness. Its shares have been delisted from the NYSE, and it is highly likely that Legion Indemnity Co., Mutual Risk's triple C (currently vulnerable) rated US insurance subsidiary, which is not yet under regulatory control, will fall under regulatory control prospectively.

"Management is trying to negotiate a restructuring plan with existing creditors. If the company cannot restructure its debt or reach some accommodation, it may be forced to liquidate through proceedings in Bermuda and in the United States," the S&P concluded.