A.M. Best Removes Ratings of CRM Holdings, Ltd. and Its Subsidiaries From Under Review

Business Wire, July 18, 2008

OLDWICK, N.J. -- A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of "a-"of Majestic Insurance Company (Majestic) (San Francisco, CA). Concurrently, A.M. Best has removed from under review with negative implications and downgraded the FSR to B (Good) from A- (Excellent) and ICR to "bbb" from "a-"of Twin Bridges (Bermuda) Ltd. (Twin Bridges) (Hamilton, Bermuda). Both companies are subsidiaries of CRM Holdings, Ltd. (CRM Holdings) (Hamilton, Bermuda) (NASDAQ: CRMH).

Additionally, A.M. Best has removed from under review with negative implications and affirmed the ICRs of "bbb-" of CRM Holdings, Embarcadero Insurance Holdings, Inc. (San Francisco, CA) and CRM USA Holdings, Inc. (Wilmington, DE). A.M. Best also has removed from under review with negative implications and affirmed the debt ratings of "bb" of the trust preferred securities of CRM USA Holdings, Inc. and the "bb" of the surplus notes of Embarcadero Insurance Holdings, Inc. The outlook assigned to all ratings is negative. (See below for a detailed listing of the debt ratings.)

These rating actions reflect Majestic's improved risk-adjusted capitalization following the implementation of a capital re-allocation plan by its ultimate parent, CRM Holdings, as well as the execution of a quota share reinsurance arrangement with a third party reinsurer. Furthermore, the issues that were faced by an affiliate, Compensation Risk Managers LLC (CRM LLC) with the New York Workers' Compensation Board have been settled with no admission of wrong doing, fines or penalties. However, CRM LLC has agreed to surrender its third party administrator license. Despite this settlement, A.M Best remains concerned regarding the financial flexibility at CRM Holdings largely due to the significant decline in its valuation, as well as the limited capital available through its insurance and non-insurance subsidiaries.

The rating actions on Twin Bridges recognize the deterioration in its risk-adjusted capitalization primarily due to stock dividends made in the second quarter of 2008 to CRM Holdings as part of its overall plan to re-allocate capital to Majestic.

The following debt ratings have been affirmed and assigned a negative outlook:

CRM USA Holdings, Inc.--

-- "bb" on $35 million 8.65% junior subordinated debt securities, due 2036

Embarcadero Insurance Holdings, Inc.--

-- "bb" on $8 million LIBOR 4.2% surplus notes, due 2033

For Best's Debt Ratings, all other 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.