The statement notes that Tower Group has “engaged an investment bank to explore strategic alternatives but no alternatives have been publicly announced to date.”

Fitch analysts say that, with the most recent adverse reserve charges, the ratings agency has concerns that some of the U.S. operating subsidiaries have Risk Based Capital (RBC) ratios below the company action Level.

In Bermuda, Tower Reinsurance Limited's (TRL) solvency ratio is below that of the minimums established by the Bermuda Monetary Authority (BMA), Fitch says. Fitch, however, did note that Tower is working with the Bermuda regulator to transfer certain assets of another Bermuda subsidiary to cure the deficiencies at TRL.

Fitch says its concerns with Tower Group's long-term viability stem from its high risk of litigation, rapid deterioration in reserves, ineffective corporate governance, and “untimely public updates of financial information.”

It said it is also concerned that Tower Group might have difficulty refinancing for $150 million in a senior convertible note due in September 2014.

The $150 million represents the second of three classes of debt Tower had. The first was a $70 million bank-loan facility, which Tower paid off through the sale of its stake in Canopius Group last month.

The remaining debt is longer term subordinated debt that is due beginning in 2033.

Fitch says Tower Group has been forced to add to reserves because it tried to grow via acquisitions during a period when high capacity in insurance markets caused rates to drop.

That has resulted in the need to add substantively to reserves in “long-tail” products for accident years 2008–2011. The losses Tower Group is reserving for are centered in workers' compensation, commercial multi-peril liability, other liability, and commercial-auto liability.

Fitch also voiced concern about inadequate internal controls relating to the loss reserving process at Tower Group.

In justifying its decision to downgrade the company, Fitch Ratings also cited Tower Group's inability to timely produce accurate financial statements. That has led Fitch to “consider its level of corporate governance to be ineffective,” Fitch Ratings analysts say in their statement.

Tower filed its second-quarter results late in November.

In October, A.M. Best downgraded Tower Group to “B++” from “A-” after the second-quarter reserve shortfall came to light. Fitch had also downgraded Tower Group in October.

In November, the company reported that there is “substantial doubt about [its] ability to continue as a going concern.” It did so after reporting a $507.3 million 2013 second-quarter net loss that stemmed from the over $300 million in reserve charges in October.

Still, Tower President and CEO Michael H. Lee, in a Nov. 15 letter issued to business partners, stated his belief that the company would be able to meet all of its obligations, “including to our policyholders as well as our lenders.”

In November, Tower Group also said it would cut its workforce by 10 percent as part of an initiative to “streamline its operations and focus resources on its most profitable lines of business.”