A storm has erupted in an insurance tea cup over what a member of the board of Hannover Re said or did not say last week.

Newspapers claimed that Wilhelm Zeller, the chairman of the German-based company's Executive Board, at a speech at the Goldman Sachs European Financials Conference 2003 in Rome on 18 June, said there was to be an end to the hard market.

But on Friday the company issued a statement saying he had been misunderstood and issued a summary of his speech across the world.

It said his speech had "been widely misinterpreted". The release said that he had said: "The overall conclusion... is that the hard market is by far not over.

"On balance, we have reached the peak in some segments with most markets continuing to be (very) attractive. A portfolio with an unchanged business mix might generate a 2004 combined ratio of 1 to 2 points less good than the excellent 2003. Opportunistic and flexible reinsurers like Hannover Re will write more profitable (US) casualty business while decreasing its exposure in softening lines and segments, which should uphold the favourable 2003 combined ratio.

Hannover Re has relatively large offices in Bermuda on Parliament Street, and with gross premiums of EUR 12.5 billion, is the fifth-largest reinsurer in the world, with business in all lines of property/casualty, life/health and financial/finite-risk reinsurance as well as program business.

In a double blow to the company, one of Hannover's subsidiaries had its ratings lowered by Standards & Poor's.

The company went on the defensive; "We would like to comment on yesterday's Standard & Poor's rating action on our London subsidiary, International Insurance Co. of Hannover Ltd. (Inter Hannover), lowering of the long-term counterparty credit and insurer financial strength ratings to 'A+' from 'AA-'.

"The downgrade reflects the changed position of Inter Hannover within the Hannover Re Group. Inter Hannover today is the Group's dedicated programme writer in Europe; thus Inter Hannover obtained by Standard & Poor's the same rating as Clarendon, our US program business writing unit.

"The rating of the Hannover Re Group remains unchanged. A.M. Best ('AA+ under review') as well as Standard & Poor's ('AA- negative outlook') continue to award us their second-highest ratings. Standard & Poor's stated in its press release that Hannover Re's management commitment to strengthen the balance sheet has been demonstrated through last week's capital raising."