A.M. Best Co. announced downgrades of two Bermuda insurers,Endurance Specialty and IPC Re, related to the companies' exposuresto Hurricane Katrina.

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Best today dropped the financial strength ratings of theoperating units of Endurance Specialty to "A-minus" from "A," andyesterday pushed those of IPC Re down to "A" from "A-plus."

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The Oldwick, N.J.-based rating agency downgraded Endurance'svarious debt ratings for the holding company, Endurance SpecialtyHoldings, explaining the rating action was taken because thecarrier's share of Hurricane Katrina losses was outside of A.M.Best's original expectations for a diversified multi-linereinsurance company.

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"Endurance's business mix profile, which includes property,casualty and specialty lines of business, was expected to have morelimited correlation and produce less overall volatility," Bestsaid. However, Endurance has a strong market profile, the ratingagency said, which enabled it to re-capitalize immediatelyfollowing Hurricane Katrina.

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The company's recently completed capital raising activitiesbring its risk-based capital to an appropriate level for its newrating and outlook, which is stable, Best said.

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As for IPC Re, Best said the drop in financial strength ratingfrom the coveted "A-plus" level applied to reinsurance subsidiariesIPCRE Limited (Bermuda) and IPCRe Europe Limited.

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Best said the downgrades reflect the decline in IPCRe'srisk-adjusted capital position due to the group sustaining netlosses from Hurricane Katrina and other catastrophe events of $856million.

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The group's reported shareholders' equity on Sept. 30 was $1.1billion, Best said, adding that the rating agency does not believethe $600 million in capital raised through a recent public offeringis sufficient to support the volatility of the group's monolineproperty catastrophe focus at its former "A-plus" level.

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