The projected cost of insurance claims caused by Hurricane Katrina is forcing the London-listed insurer Goshawk to look at ways of raising fresh capital.
The insurance group is taking the step because it wants to prevent ratings agencies from downgrading its credit-worthiness, which could make it harder to attract business.
The problem lies in its Bermuda-based subsidiary Rosemont Re, which has had its financial strength questioned by the specialist credit insurance rating agency AM Best.
AM Best has warned that it might downgrade the rating of Rosemont Re - currently rated A - excellent - after learning that the insurer expected its losses from Hurricane Katrina to reach $25m to $30m (£14m-£16m).
The ratings agency fears that these losses, on top of new losses caused by Hurricane Ivan last year, would undermine its balance sheet.
Goshawk, which is already under fire from its major shareholder, Phoenix Asset Management, over its performance, said it was planning to meet AM Best shortly.
The company's board said it was "engaged in capital-raising initiatives" because it wanted to take advantage of the "beneficial premium-rating environment" expected as a result of Hurricane Katrina.
Insurance companies have been predicting that the cost of some types of insurance will rise substantially following the Gulf of Mexico disaster. As insurers pay out claims, they are expected to raise premiums for new policies, particularly for business sectors such as oil and marine.
While Goshawk said it might raise fresh capital, another insurer, Alea, admitted it might have to sell itself after a rating agency stripped it of its all-important A rating.
Alea, based in Bermuda but listed in London, said it was exploring "strategic initiatives" after Standard & Poor's cut its ratings to BBB+ from A-. S&P did not cite Hurricane Katrina as a reason but expressed concern about the group's "operating performance".
Alea had been trying to raise capital before the ratings cut and analysts now believe such a move could be hampered by the deterioration in its credit-worthiness.
Analysts at Fox-Pitt, Kelton investment bank described the rating action as "another nail in the coffin" of Alea. The analysts regard an attempted break-up and sale of the business as the next logical step.
Alea's shares fell 3.5p to 136.5p. Goshawk was up 0.25p to 37p.
