Earlier, the London office of Moody's Investors Service said it had placed Converium's A2 financial strength ratings and Baa1 debt ratings on review for possible downgrade.

In its ratings announcement, A.M. Best said it has been factoring further adverse reserve development in its ratings for some time, but the effect of this reserve action will cause second-quarter results to fall below expectations.

Moody's noted that the reserve strengthening currently contemplated by Converium will bring its 1997-2001 gross loss ratios for U.S. casualty reinsurance business to levels in line with the average gross loss ratios reported by its broker market reinsurance competitors.

Moody's added that Converium's gross loss ratios remain below those of the direct market reinsurers, which suggests that the company may experience further adverse development on its U.S. casualty reinsurance loss reserves.

In Moody's opinion, to maintain its current ratings Converium would need either to reinforce its capital base or to reduce its operating leverage to levels compatible with a single-A rating by selling major operating subsidiaries, discontinuing certain lines of business, or, to a far lesser extent, reducing the investment risk.

In absence of such actions, Moody's would expect to lower the ratings by at least one notch.

Moody's also noted that any secondary offering of common shares could be challenging in the short term due to the sharp decline of the stock price following Converium's announcement.