Corp, has had its double-A-plus rating placed on Rating Watch -- Uncertain.

Rating agency Duff & Phelps Credit Rating Co. yesterday announced the review of the rating for Capital Re's wholly-owned subsidiary, KRE Reinsurance Ltd.

KRE is a guarantor engaged in several credit-related insurance businesses including reinsuring financial guaranty and residential mortgage insurance risks.

Duff & Phelps said the move was prompted by the announcement of the deal between the two companies which meant ACE was to buy all of Capital Re's outstanding common shares.

The agency said: "While the acquisition will likely improve the financial flexibility of Capital Re and its subsidiaries, our review is intended to fully assess the overall capital strength of the combined entity.'' The statement issued by the ratings agency also said it would be reviewing potential losses that could result from KRE's $67 million exposure to its reinsurance client International Financial Services Life Insurance Co.

That company is at the centre of allegations concerning financial impropriety.

The rating agency will issue its final rating determination after due diligence on the financial strength of the consolidated ACE group and the impact of the merger in terms of capital, financial flexibility, future underwriting and growth targets.