Rating agency Moody’s has lowered the financial strength ratings of Royal & SunAlliance Insurance Plc (RSA) and it subsidiaries to Baa2 from Baa1 as a result of concerns over its U.S. operations. The subordinated debt rating of Royal & SunAlliance Insurance Group was also lowered to Ba2 from Ba1. The outlook for all ratings is stable, except for RSA’s U.S. subsidiaries, where the outlook is negative. Although the group has recently improved its capital position, Moody’s has doubts about the capital position of its U.S. operations, noting that capital injections required by the U.S. operations could have an overall negative impact on the group’s position. Legacy issues facing the U.S. include, “the potential for further adverse loss reserve development, significant A&E (asbestos and environmental) liabilities, reinsurance recoverables, unfunded pension liabilities and uncertainty with respect to litigation issues facing the group”. Mitigating this are strong first-quarter 2003 results for the group as whole, and progress in its restructuring program announced last November. Responding to the downgrade, RSA finance director Julian Hance says, “We understand the increased pressure on the rating agency sector generally, especially in the USA. However, the change in our rating does not reflect any weakening in our position since the outlook was reviewed by Moody’s, in April 2003 We do not believe that there is any information that has been provided to Moody’s which could have led them to this decision and, understandably, we are disappointed that our delivered improvements to date are not more fully taken into account.” Moody’s does not rate the Canadian operation of RSA, Royal & SunAlliance Insurance Pool of Canada. Late last year, A.M. Best affirmed the pool’s rating of A- (excellent).