CONVERIUM INCREASES SIZE OF RIGHTS ISSUE AND RESERVES

Swiss reinsurer Converium is to increase its reserves by between $50m and $100m after a commissioned independent review by actuarial consultants Tillinghast-Towers Perrin argued that the reinsurer had a reserve shortfall of $213m. Converium will charge the eventual increase to book in the third quarter. The reinsurer also announced yesterday that it would be increasing the size of its rights issue to $420m — $20m more than the range of $350m to $400m announced in July. Converium said that it expected the issue, underwritten by CSFB and JP Morgan, to be completed by mid-October. In order to reduce capital requirements Converium has entered into a stop-loss retrospective retrocession agreement with Berkshire Hathaway to limit its exposure to future claims, and will leave certain US lines, reducing premiums by $500m a year by 2007. Converium Reinsurance (North America) (CRNA) will be placed into run-off, with the underwriting of long-tail Specialty Lines long-tail risk being moved to Zurich. Commutations for the run-off unit will be sought “where adequate”. Rating agency Moody’s responded by cutting Converium AG’s financial strength rating to Baa1 from A2. It said that it had done this mainly because of the franchise damage suffered by Converium as a result of putting CRNA into run-off.