A major rating agency has forecast property catastrophe reinsurance rates will continue their decline between 15 and 20 percent for 1998, barring a significant catastrophic event this year.

The outlook came from Standard & Poor's (S&P) as they assigned single-`A' claims paying ability and issuer credit ratings to Bermuda-based International Property Catastrophe Reinsurance Co., Ltd. (IPC Re), the wholly owned subsidiary of IPC Holdings, Ltd. (IPC).

The prediction comes after Bermuda reinsurers, a significant force in the worldwide `cat' market, have suffered through an extended softness in insurance and reinsurance pricing that has led to a diversification by some Bermuda reinsurers into other lines of business.

For one of those reinsurers, IPC Re, S&P stated that their rating reflected experienced management, excellent capital, strong earnings, a working relationship with the shareholder, diversification of risk exposure, limited operating history and a lack of product diversification.

S&P said: "Lacking catastrophic activity, IPC Re's combined profitability ratios are expected to remain around 45-50 percent and capital levels will remain strong.'' IPC management, said S&P, average 24 years of combined property/casualty and reinsurance experience, with much of the experience related to tenures at American International Group (AIG), a significant stakeholder in IPC.

The management team is led by president and CEO John P. Dowling, and includes senior vice president underwriting James P. Bryce, vice president and CFO John R. Weale, vice president and secretary Dennis J. Higginbottom, and vice president underwriting Peter J. Cozens.

Diversification comes from management's experience in many markets from around the world, including London, continental Europe, Japan and the US.

IPC Re's capital adequacy, as measured by S&P's catastrophe model, indicates that the company's 171 percent result is commensurate with its rating category and is achieved without the use of financial leverage or retrocessional purchase.

Although only operational for four years, IPC Re's profit margin, as measured by return on revenue (ROR), equated to 62.7 percent for 1996, and betters its market-peer average of 54.6 percent.

Additional measurement of profitability is return on equity (ROE), which at 19.9 percent for 1996, was at its market-peer average, but measured better than the company's three year average of 17.7 percent.

Since IPC's inception, AIG subsidiaries have provided it with administrative, investment management and custodial services.

Rating agency A.M. Best Co. has upgraded Bermuda-based insurer ACE Ltd. to its A (superior) category from A (excellent). The rating is important to the company as it helps ACE compete by assuring potential customers of its financial strength in case of a large payout on a claim.

A.M. Best stated it was upgrading ACE's rating because of the company's expanding product line, diversified geographic risk spread, and long-term client relationships. The rating agency states that ACE's strategy will help it take advantage of acquisitions and make it less vunerable to competition.

"The `A ' rating reflects the group's strong market position as a lead provider of large programme limits to Fortune 1000 companies, as well as its global market position and product diversity,'' A.M. Best stated. "The group maintains strong financial flexiblity, with excellent liquidity and no outstanding debt.'' Over the past five years ACE has averaged an annual premium growth rate of about 20 percent, and retained 90 percent of its clients. ACE has $2.2 billion in shareholder's equity, and reserves of $1.8 billion as of September 30, 1996.