Quanta Capital Holdings Ltd.'s internal controls over financial reporting are ineffective, the embattled Bermuda-based insurer and reinsurer admitted in a regulatory filing last week.

Quanta, which has been exploring strategic alternatives for its business since a ratings downgrade out of the A range in March, is now in the process of running off most of its specialty lines insurance and reinsurance.

The Business Insurance website said that in its filing with the Securities and Exchange Commission, Quanta said that its management concluded that the company's internal controls over financial reporting are "not effective". Among the problems identified are:

Quanta lacks enough personnel within the company's US accounting function with adequate expertise and training commensurate with Quanta's financial reporting requirements.

The company does not maintain effective controls over the accuracy and completeness of certain spreadsheets used as part of Quanta's financial reporting process.

Quanta does not maintain effective controls over the completion and reconciliation and analyses for gross and ceded premiums, losses, other expenses and the related balance sheet accounts for Quanta's US processed transactions.

Business Insurance said Quanta previously reported that its management also failed to maintain effective disclosure controls or procedures to ensure that information was reported and filed with the SEC in a timely fashion, though that material weakness was remedied as of June 30, the filing said.

Quanta in the filing also disclosed that New York-based PricewaterhouseCoopers L.L.P. on August 15 resigned as its independent registered public accounting firm. In a letter sent to the SEC, PwC confirmed that Quanta's statements were accurate.

A PwC representative declined to specify the reasons for the firm's resignation.

Quanta has hired Raleigh, North Carolina-based Johnson Lambert & Co. L.L.P. to replace PwC, it noted in the filing.

Earlier this month, Quanta posted a net loss of $60.1 million for the first half of 2006, compared with a profit of $7.9 million in the same period last year.