Financially troubled Bermuda insurance company Trenwick was dealt another blow with word that its financial strength rating has been downgraded by AM Best Co.

Rating agency AM Best had previously given the company one rating but said it had now also issued separate ratings for each company within the group.

All ratings remain under review with negative implications indicating the possibility of further downgrades.

And the rating agency said it had also downgraded debt ratings related to securities issued by various holding companies within the group.

AM Best added that the rating actions reflected its "ongoing concerns about the increased operating leverage in Trenwick's core operating subsidiaries, along with the limited financial flexibility maintained by the group as a whole".

Although AM Best said it recognised the procedures taken by management to reduce operating and financial leverage, it said it believed that Trenwick remained constrained in its ability to generate a level of capital from ongoing businesses that is consistent with its prior ratings.

In addition, the rating agency noted obligations associated with the scheduled maturity of a $75 million senior note (due in April 2003) placed further pressure on the organisation's capital resources and believes that its negotiating position with its various creditors was becoming "increasingly tenuous".

In August 2002, AM Best placed the group's ratings under review with negative implications pending management's successful completion of a capital restructuring.

The rating agency said it would continue to monitor the organisation's progress on these initiatives as well as its plans for each of its operating subsidiaries.

But it did not rule out further downgrades are possible should Trenwick's ongoing financial restructuring initiatives fall behind and fail to adequately resolve concerns with regards to its current operating and financial leverage position.

As part of this review, A.M. Best assigned financial strength ratings to the various Trenwick entities based upon their stand-alone financial position. The financial strength ratings of A- (Excellent) have been downgraded to B+ (Very Good) for the following subsidiaries of the Trenwick Group: Trenwick America Reinsurance Corporation, Trenwick International Limited, Insurance Corporation of New York and Dakota Specialty Insurance Company.

The financial strength rating of A- (Excellent) for Chartwell Insurance Company has been downgraded to B (Fair) while the financial strength rating of B++ (Very Good) has been lowered to B+ (Very Good) for LaSalle Re Limited .

Meanwhile the debt rating has been downgraded to "bb-" from "bbb-" for Trenwick America Corporation on $75 million 6.7 percent senior notes, due April 2003 (guaranteed by Trenwick Group, Ltd.) on senior unsecured debt under shelf registration

And the following debt ratings have been downgraded to "b-" from "bb" for Trenwick Capital Trust I on $110 million 8.82 percent subordinated capital securities, due 2037 and for LaSalle Re Holdings on $75 million Series A preferred shares.