Rosemont Re, a Bermuda reinsurer that last night saw its financial strength rating fall, is to stop selling policies.

The decision came after Rosemont failed to replenish capital drained away by heavy storm losses, said chief financial officer Jonathan Beck.

In total, about 37 percent of the Rosemont's shareholders' equity ($242 million at June 30) was wiped away by $90 million in net losses from Katrina and Rita, two hurricanes which devastated the US Gulf Coast.

Oldwick, New Jersey ratings firm AM Best last night said it downgraded Rosemont's financial strength rating from A- (Excellent) to B (Fair) because of continued capital adequacy concerns.

"Without the possibility of attracting new capital, Rosemont no longer has the financial capacity to maintain its current catastrophe business profile," the ratings agency said.

Rosemont's ratings have been assigned a negative outlook, meaning the company could see a further downgrade to ratings.

AM Best, one of the most followed insurance rating agencies, said it took into consideration a $64 million debt held by Goshawk Holdings (Bermuda) Ltd., Rosemont's Bermuda parent, when it made the downgrade.

As an operating subsidiary, Goshawk has no source of funding to service the debt, and now neither does Rosemont, based on its decisions to stop selling policies.

Mr. Beck told The Royal Gazette to put the business in run-off seemed the best way to "maximise shareholder value" after Rosemont, a wholly-owned unit of UK insurer Goshawk, failed to raise additional capital, or negotiate a sale which had been a second option.

A company in run-off effectively sells no new policies but remains open, on a smaller scale, to honour claims that are filed by existing policyholders.

Mr. Beck said he hoped the company's 20 staff may be offered jobs with an unnamed company Rosemont management are currently negotiating with over renewal rights.

Under this scenario, the third party would purchase the right to sell policies to insurers already clients of Rosemont, when it came time to renew marine and property policies. Reinsurance is effectively insurance for insurers, with reinsurers contracting to take on some of the risk in policies already sold to companies and individuals.

Mr. Beck would not be drawn on whether management are talking with an already established company, or persons who may be looking at starting up a new Bermuda venture. "All I can say right now is we are talking to a number of parties."

Phoenix Asset Management Partners, a UK company that owns nearly 30 percent of Goshawk, said on 29 September that it had been "unable to persuade the executive management of Rosemont Re to work with us".

Phoenix had earlier threatened to call an extraordinary general meeting to try and institute some changes at the company, saying shareholders were being "poorly treated" by management.

In July, Phoenix said it remained "very supportive of (chief executive) Russell Brooke and his quality team at Rosemont Re in Bermuda".