A.M. Best Downgrades Ratings of Clearwater Insurance Company and Places Ratings Under Review.

OLDWICK, N.J. -- In the third paragraph, all references to the acronym for Odyssey America Reinsurance Corporation should be 'OARC' (sted 'ORAC').

The corrected release reads:

A.M. BEST DOWNGRADES RATINGS OF CLEARWATER INSURANCE COMPANY AND PLACES RATINGS UNDER REVIEW

A.M. Best Co. has downgraded the financial strength rating (FSR) to A- (Excellent) from A (Excellent) and issuer credit rating to "a-" from "a" of Clearwater Insurance Company (Clearwater) (Wilmington, DE). All ratings have been placed under review with negative implications due to A.M. Best's view of implicit and explicit support provided by its parent company, Odyssey America Reinsurance Corporation (OARC) (Stamford, CT), which is a member of Odyssey Reinsurance Group.

This rating action reflects A.M. Best's opinion that Clearwater is not an integral operating entity of Odyssey Reinsurance Group and that its stand-alone business position, operating performance and capitalization do not afford it the ratings of the Group. Clearwater has significant liability leverage with approximately 45% of its carried loss reserves as of year-end 2007 constituting asbestos and environmental liabilities (A&E). When Clearwater's rating was last affirmed, A.M. Best had contemplated that OARC would be providing significant reinsurance protection on these reserves. This protection has not been forthcoming. Clearwater has incurred adverse development relating to A&E reserves of $77.4 and $68.2 million in years 2007 and 2006, respectively. A.M. Best is concerned that these liabilities could potentially run off adversely. While this may be an issue with Clearwater, A.M. Best does not consider these exposures to be significant to Odyssey Reinsurance Group when taken as a whole. Additionally, the company contributes nominal earnings to the group and has limited premium volume.

The ratings of the members of Odyssey Re Group, including OARC, Hudson Insurance Company (HIC), Hudson Specialty Insurance Company (HSC) and Newline Insurance Company Limited are unchanged as a result of this rating action. Although HIC and HSC are direct subsidiaries of Clearwater, they receive explicit support from OARC in the form of prospective quota share reinsurance and a guarantee from OARC on all third-party reinsurance recoverables.

A.M. Best will resolve the under review status of Clearwater after assessing its prospective financial and business position and further discussions with management.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.