claims-paying ability rating on Terra Nova Insurance Co. Ltd. and Terra Nova (Bermuda) Insurance Co. Ltd.

S&P also affirmed its triple-`B' senior debt rating on Terra Nova Insurance (UK) Holdings Plc's two existing debt issues and on the $100 million senior notes to be issued this month.

"The rating affirmations reflect the continuing impressive performance of Terra Nova Group, featuring strong profitability, the further development of its good business position and superior levels of risk-related capitalisation,'' S&P reported.

S&P based its affirmation in part on the company's position at Lloyd's through Octavian Syndicate Management Ltd. "A rights issue in 1995, the IPO (initial public offering) in 1996, and strong earnings since 1994 have greatly enhanced Terra Nova's capital position from a weak position before 1995,'' S&P added.

"At December 31, 1997 group capitalisation in terms of Standard & Poor's risk-based capital model was superior at two times the required level.'' The rating was also based the groups average return on revenue, which in the five years after a poor 1992 was an "impressive'' 13.7 percent. The group's combined ratio averaged 102.8 percent over the same period.

However S&P states the positive rating factors were offset by the group's limited global reach.

"Terra Nova benefits from good geographic and product diversity, and sees value in being a `conglomerate of niches,'' but global representation is so far limited, with the group having no physical presence in the US and Far East markets.'' Still, S&P's prognosis for Terra Nova was positive. S&P forecasts that risk-based capitalisation will decline but will remain in excess of 1.5 times the required level.

Volatility of the insurance and reinsurance sector is forecast to bring the return on revenue down to an average of nine percent, while combined ratio will be about 100 percent, S&P states.

The agency predicts the group's premiums will grow about 33 percent this year mainly due to increased participation at Lloyd's.

Terra Nova (Bermuda) Holdings Ltd. last week reported net income of $24.4 million, or 94 cents per share, for the first quarter ended March 31, a gain of 32 percent over the same period last year.